With spending boost, budget gives Saudi reforms new impetus

King Salman during a cabinet meeting to announce the 2019 budget. (SPA)
Updated 20 December 2018

With spending boost, budget gives Saudi reforms new impetus

  • King Salman says budget is the largest in the Kingdom’s history, aiming to support economic growth
  • The government aims to boost spending by about 7 percent in 2019

RIYADH: Saudi Arabia hopes a bumper budget unveiled on Tuesday will revive the economy, with record levels of government spending intended to spur growth.

The government aims to boost spending by about 7 percent in 2019, despite a continuing budget deficit — the shortfall in revenues compared to expenditure. 

King Salman said the budget was the largest in the Kingdom’s history, and one designed to achieve financial stability.

“We are determined to go ahead with economic reform, achieving fiscal discipline, improving transparency and empowering the private sector,” he said.

Crown Prince Mohammed bin Salman, who is behind the Vision 2030 program to reform the economy, said the government would continue to “diversify the sources of income and consolidate fiscal sustainability through boosting non-oil revenues.” 

Non-oil revenues increased to $77 billion this year and are estimated to reach $83.5 billion — or around one third of total revenues. 

Minister of Finance Mohammed Al-Jadaan said the budget announcement, along with a speech by King Salman pledging to continue paying allowances to citizens, marked a “historic day” for the Kingdom.

Finance Minister Mohammed Al-Jadaan said the budget marked a historic day for the Kingdom. (Ziyad Alarfaj/Arab News)

Government spending is projected to rise to 1.106 trillion riyals ($295 billion) next year, up from an actual 1.030 trillion riyals this year, Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to 975 billion riyals, mostly from oil. The deficit is forecast at 131 billion riyals for next year, a decline on 2018.

Saudi Arabia has been working to diversify its economy away from oil, by promoting the private sector, as well as increasing the prices of fuel and energy and imposing a value-added tax. 

Government coffers have also been given a boost by Saudi Arabia’s clampdown on corruption late last year, in which scores of top officials and business executives were detained at the Ritz-Carlton hotel in Riyadh. 

Al-Jadaan said the government had collected about 50 billion riyals this year in settlements, and he expected collections to continue next year. 

Investigators said this year they aimed to seize about $100 billion overall.

The minister said Saudi Arabia was working to fulfil payments owed by the government to private contractors. “The government is seeking to settle any dispute with the private sector with regard to the due payments,” he said.

Saudi Arabia, long reliant on oil revenues, has suffered a budget deficit every year since 2014, when a slump in energy prices lowered state income. 

Its 2019 budget announcement came as world oil prices tumbled to new one-year lows, amid concerns over demand.

Selling sketches and clothes, Libyan women set up businesses against the odds

Updated 25 June 2019

Selling sketches and clothes, Libyan women set up businesses against the odds

  • Libya has only a tiny private sector and the economy is dominated by the state
  • Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power

TRIPOLI: When inflation began eating into her state-paid salary Libyan architect and assistant professor Seham Saleh started selling drawings over the Internet to help pay the bills.
She joins a growing number of Libyan women launching start-ups in the conservative Arab country, where many still think a woman’s place is in the home but where the strains on personal and family income following years’ of political chaos have forced women to look for more work.
Libya has only a tiny private sector, which means there is a market for locally-produced goods. The economy is dominated by the state, which employs most adults under a structure set up by Muammar Qaddafi, who was toppled in 2011.
Men are the traditional breadwinners, although around 30 percent of women were in the labor force as of 2015, according to a UN report.
“I cannot live on my assistant professor salary of 1,000 dinars ($256) even if it is paid out,” said Saleh. She has been selling drawings of people in Libyan dress or book marks she created on a computer.
“Thank God... people wanted to buy the products,” she said. She also does freelance work as an architect.
Once one of the richest countries in the region, the chaos and civil war that ensued after the fall of Qaddafi has seen Libya’s living standards erode. Little is now produced in Libya other than oil, even milk is imported from Europe.
Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power, and the government effectively devalued the dinar last September.
A cash crisis means public servants often do not get their salaries paid out in full. Lenders have no cash deposits as the rich prefer to hold their cash themselves, rather than deposit it in a bank.
Women rarely had jobs outside of sectors such as teaching, although the need for more family income has changed the situation, said Jasmin Khoja, head of a women’s business support venture.
Her organization, the Jusoor center for studies and development, has trained some 33 would-be female entrepreneurs, offers legal advice and office space as women often can’t afford their own.
While Seham’s “Naksha” art business is in its early stages, others such as Najwa Shoukri’s start-up are growing fast. She started designing clothes from home in 2016, and selling them online.
Now, together with five other women, she has a workshop selling 50 pieces a month and plans to open a shop next year on Jaraba Street, the main fashion shopping avenue in Tripoli.
To make the shop a success her output would have to rise to 150 pieces a month. Her brother and family have contributed to investments worth 10,000 dinars.
The biggest challenges for start-ups are legal hurdles and the lack of electronic payment systems.
Some Libyan commercial laws go back to the 1960s and are aimed at big corporations such as oil firms, not start-ups. Under these regulations firms need to deposit thousands of dinars.
“Banks do not give loans, which stops projects and makes them unable to grow or employ other women and young people,” Khoja said.
Undeterred, Mayaz Elahshmi started a business last week training women to fix computers and smartphones.
“There is big demand as many women are reluctant to go to a phone shop where men work, as they have personal files on their phones.”
Six people came to her first training session, each paying 30 dinars.