Saudi Arabia reveals economic reform plan

Saudi Arabia’s cabinet approved on Monday the National Transformation Program (NTP), part of the Vision 2030 reforms, under which the government will aim to triple non-oil revenue and cut public sector wages and subsidies by 2020.

The NTP, which includes over 500 projects and initiatives, will cost an estimated SAR 270 billion to implement. This cost is not expected to have an impact on Saudi budget spending, as the private sector is expected to contribute a further SAR 300 billion to NTP initiatives.

The private sector’s contribution to finance initiatives will be increased significantly, thus relieving the government of 40 percent of funding costs by 2020. The objective will be to gradually increase the private sector’s contribution to the country’s GDP.

The new program outlines a strategy to boost non-oil revenues to SAR 530 billion ($141 billion) within four years’ time, from SAR 163.5 billion currently. 

New non-oil revenue is also expected to come from the introduction of a value-added tax (VAT), which will be imposed on harmful products such as sugary drinks and tobacco.

Public sector salaries will be cut to 40 percent of total spending (SAR 456 billion) from the current 45 percent (SAR 480 billion).

Around 450,000 new non-government jobs will be created. Key sectors such as healthcare will be revamped, and the number of Saudi women in the workforce will be increased.

Saudi Arabia will maintain oil production capacity at 12.5 million barrels per day (bpd), raise gas output capacity to 17.8 billion standard cubic feet a day from 12 billion, and raise refining capacity to 3.3 million bpd from 2.9 million.

As part of efforts to reduce its dependence on oil, the kingdom will also install 3.5 gigawatts (GW) of renewable power capacity by 2020 and spend SAR 300 million on identifying locations for atomic electricity plants and preparing them for construction.

Other new initiatives include a SAR 2.1 billion plan to restructure the postal sector. Around SAR 5 million will be invested to establish an intellectual property authority, while SAR 8 million will be used to improve civil service performance.