São Paulo – The International Monetary Fund (IMF) advised Saudi Arabia not to increase government spending, despite the recent hike in international oil prices. Notwithstanding the new scenario, the Arab country must keep on rolling out its economic reform program, to ensure that medium-term fiscal targets are met.
The information is from a report issued by the IMF this Tuesday (22), based on preliminary conclusions drawn by the staff mission led by executive Tim Called to Saudi Arabia from May 2 to 14 this year.
Called said key challenges facing the Saudi government include ensuring that ongoing structural changes will continue. According to the executive, the country is making progress and its government remains committed to comprehensive economic and social reforms designed to enhance private sector dynamism and rid the economy of its dependency on petroleum.
“Growth is expected to pick up this year and over the medium-term as reforms take hold,” a press release quoted Tim Called as saying. To this end, he said, the government must curb growing spending and take action to increase revenue. The country recently introduced a Value Added Tax (VAT), which the IMF said was a historical achievement in improving tax culture and administration in the country.
Called said measures designed to improve budget and the fiscal scenario, increase transparency and develop macro-fiscal analyses are progressing well. He suggested broadening the coverage of fiscal data beyond the central government to ensure a more complete assessment of the government’s impact on the economy.
Called said public and private sector roles in developing the non-oil economy must be carefully considered. “While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd-out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own,” said Called.
According to the report, the government is focusing on creating private sector jobs for citizens, especially young people and women. The IMF claims that government policy must send out clear signals regarding limited prospects for public employment, as well as strengthening education and continuing to support increased female participation.
Translated by Gabriel Pomerancblum
