Washington- The International Monetary Fund (IMF) commended the transparency afforded by the Kingdom of Saudi Arabia with respect to financial performance.
The Kingdom has recently published the Financial Balance Program and the first quarter budget performance report, a faction which supports investment and bolsters private sector confidence.
In a statement today, the Fund noted that the steps taken by the Kingdom to adjust its fiscal policy are in line with the decline in oil prices.
It pointed out that balancing the budget, however, does not need to be met in 2019 as set out in the Fiscal Balance Program (FBP) given the Kingdom of Saudi Arabia’s strong financial asset position and its low debt.
A more gradual fiscal consolidation to achieve budget balance a few years later would reduce the effects on growth in the near-term while still preserving fiscal buffers to help manage future risks, the international body said.
An IMF team led by Tim Callen held discussions from April 30-May 11 on the 2017 Article IV Consultation with the Kingdom of Saudi Arabia.
A report by the team said that discussions were positive in expressing thanks to the Saudi government for hospitality, good cooperation and constructive discussions provided.
The statement said that based on preliminary findings of this mission, the staff will prepare a report that will be presented to the IMF’s Executive Board.
The report said that a large, sustained, and well-paced fiscal adjustment is needed to achieve budget balance over the medium term and reduce obstacles to private sector growth.
The report said that female participation in the labor force has been increasing.
It added that the Kingdom of Saudi Arabia “has embarked on a bold reform program under Vision 2030. The reforms aim to diversify the economy, give a larger role to the private sector, increase the number of jobs for Saudis in the private sector, and adjust fiscal policy to ensure macroeconomic stability.
The reforms are ambitious and further efforts on effective prioritization, sequencing, coordination, and communication will be needed to maximize the chances of their successful implementation.”
The statement said that “energy price reforms are a key priority, but there is scope for a gradual implementation to give households and businesses more time to adjust. The household allowance is a welcome and powerful tool to support low- and middle-income households as energy prices increase.”
It added that successfully implementing non-oil revenue reforms such as the excises and VAT is very important.
“Creating more jobs for Saudi nationals in the private sector is essential,” it said.
The statement highlighted the importance of privatization programs and the government partnership with the private sector.
“The exchange rate peg to the US dollar continues to serve the Kingdom of Saudi Arabia well …,” it added.
“Banks are well regulated and supervised, and SAMA (Saudi Arabian Monetary Authority) has successfully managed emerging financial sector risks.”