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Saudi efficiency review finds up to $4.5 bln of cost savings -minister
April 20, 2017 / 11:21 PM / 7 months ago

Saudi efficiency review finds up to $4.5 bln of cost savings -minister

* Around 15 bln-17 bln riyals of savings identified

* Saudi ready to start value-added tax on Jan. 1

* Will implement even if Gulf neighbors not ready

By David French

WASHINGTON, April 20 (Reuters) - The body set up by Saudi Arabia to cut the costs of government projects has identified up to 17 billion riyals ($4.53 billion) in further efficiency savings, the kingdom’s finance minister told Reuters on Thursday.

Government sources had told Reuters earlier this week that Riyadh was ordering ministries and agencies to review billions of dollars’ worth of unfinished infrastructure and economic development projects with a view to shelving or restructuring them.

The action forms part of a reform plan by the world’s top oil exporter aimed at shifting its economy away from reliance on hydrocarbon revenues and paring back support for a generous welfare state to cope with the reduction in crude prices.

Mohammed al-Jadaan said this was the second major effort by the Bureau of Capital and Operational Spending Rationalization since its establishment, after previous efforts highlighted 80 billion riyals of savings in 2016.

“They just were making sure that they (the projects) are done in the most efficient manner. They are about to conclude their work and they have identified about 15 billion riyals or 17 billion riyals of savings so far,” Jadaan said, without elaborating on the nature of the savings.

Lower oil prices have left Saudi battling huge budget deficits. The deficit is expected to hit 198 billion riyals or 7.7 percent of GDP this year, after peaking at 367 billion riyals or 15 percent of GDP in 2015.

The introduction of a 5 percent value-added tax should also bolster the Saudi government’s coffers. Jadaan said Saudi is “ready and willing to implement” the tax on schedule on Jan. 1, 2018 and it could happen without other Gulf countries.

The six Arab monarchies of the Gulf Cooperation Council are all aiming for an identical start date for the tax, but economists and officials in some countries have said privately that simultaneous introduction may not be feasible.

This is due to the complexity of creating the administrative infrastructure to collect the tax and the difficulty of training companies to comply with it in a region where taxation is minimal.

Austere conditions have weighed on Saudi’s economy, which has traditionally been reliant on state spending to fuel growth.

Economists polled by Reuters this week trimmed their average growth forecast for 2017 to just 0.5 percent from 0.8 percent, as Riyadh shoulders much of the burden of oil output cuts under a global deal among producers to prop up prices.

To help bolster the economy, Saudi is preparing a number of mega development projects. The first, an entertainment district south of Riyadh that will house sports, cultural and recreational facilities including a safari and a Six Flags theme park, was unveiled this month.

Jadaan said further schemes would be announced in October, when sovereign wealth fund the Public Investment Fund unveils its strategy.

$1 = 3.7498 Saudi riyals Additional Reporting by Reem Shamseddine in Khobar, Saudi Arabia, Andrew Torchia in Dubai; Editing by Tom Brown

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