While describing the reforms designed to reduce Saudi Arabian economy’s dependence on oil and build a sustainable future, ministers of the kingdom said that the country plans to more than triple the government’s non-oil revenues and clamp down on public-sector salaries over the next five years.
According to comments by ministers and documents distributed to reporters in Jeddah, some 450,000 non-government jobs would be created through the implementation of the National Transformation Plan (NTP) that aims to boost non-oil revenue to 530 billion riyals ($141 billion) by 2020.
The plan aims to “achieve a prosperous future and sustainable development,” and “enhance the level and quality of services” provided by government, it said.
The NTP will cost around 270 billion riyals to implement and includes over 500 projects and initiatives as well as performance indicators for ministries and other government agencies.
An additional 300 billion riyals was expected to be contributed to NTP initiatives by the private sector and the cost would have no impact on Saudi budget spending, said Minister of State Mohammed Al al-Sheikh.
As the kingdom prepares for a future of shrunken oil revenues and a rising population, Vision 2030, which was announced by Deputy Crown Prince Mohammed bin Salman in April aims to overhaul many aspects of Saudi Arabia’s economy and society. The NTP is a part of that project.
Resulting in a state budget deficit of nearly $100 billion last year, the finances of the world’s top oil exporter have been hit hard since the summer of 2014 when crude prices plunged.
The percentage of government debt to gross domestic product is planned to be increased to 30 percent from 7.7 percent now.
The introduction of a value-added tax, “sin taxes” on sweet drinks and tobacco, and fees imposed on the private sector is expected to provide new non-oil revenues under Vision 2030.
There were no plans to introduce income tax for citizens, Al al-Sheikh said.
150 million riyals has been proposed to be spent on preparing income tax for residents according to the plan. The only tax commitment approved so far was for VAT, Al al-Sheikh said.
The water and electricity subsidies is planned to be cut by 200 billion riyals and the value of public salaries and wages as a proportion of the budget is also aimed to be reduced to 40 percent from 45 percent by 2020, according to the NTP.
The refining capacity is planned to be raised to o 3.3 million bpd from 2.9 million and gas output capacity to 17.8 billion standard cubic feet a day from 12 billion while maintaining the oil production capacity at 12.5 million barrels per day (bpd), the the document said.
Saudi Arabia will also aim to spend 300 million riyals on identifying locations for atomic electricity plants and preparing them for construction and install 3.5 gigawatts of renewable power capacity by 2020.
(Adapted from CNBC)