Saudi Deputy Crown Prince Mohammed bin Salman warned on Tuesday that the government could be forced to tighten austerity measures if oil prices fall again for a prolonged period of time.
In a rare, televised interview with Saudi-owned television MBC, Prince Mohammed, who also heads the Kingdom's Economic and Development Affairs Council, discussed Saudi Arabia's economic reform plan, Vision 2030.
Responding to a question on why the government decided last week to reinstate bonuses to state employees after cutting them for about eight months, the Prince said that oil prices and revenues had picked up.
"The decision was temporary," he said. "It was reviewed after economic performance improved."
Earlier this week, Jihad Azour, the International Monetary Fund's Middle East and Central Asia Director, told Argaam that Saudi Arabia was committed to economic reforms, despite its latest decision to reinstate bonuses for state employees.
In its latest outlook report, the IMF urged Saudi Arabia and its Gulf neigbors to focus on diversification as the sharing of oil wealth and expensive subsidies were no longer economically sustainable after oil prices had more than halved since 2014. The IMF earlier revised Saudi Arabia's economic growth outlook to 0.4 percent this year from 2 percent last year.
Meanwhile, oil income still accounts for 60 percent of the Kingdom's revenues.
Saudi Arabia, the world’s largest oil exporter, plans to sell five percent of Saudi Aramco’s shares, at a predicted price of $100 billion. Saudi officials say the current valuation of Aramco is around $2 trillion, which would make the IPO the world’s largest ever.
In the recorded interview, the 31-year old Prince said that the Saudi Public Investment Fund (PIF)— one of the largest sovereign funds in the world— plans to invest SAR 500 billion domestically three years after Aramco’s initial public offering, which is still slated for 2018.
“The government will be the one deciding on the level of oil production even after the Aramco IPO. Oil is the property of the state," he said.
He added that the Kingdom’s economic reform plans include the privatization of about 100 state-owned companies, as well as plans to privatize the healthcare sector.
“All successful, developed countries have privatized healthcare,” he said. “In the United States, for example, you won’t find a state-owned hospital.”
“It will be more clear by the end of the year how we will go about privatizing the healthcare sector,” he added.
The Prince also mentioned that strengthening the entertainment sector could bring the kingdom about $22 billion, which are spent by Saudi citizens outside the Kingdom on tourism and entertainment.
Write to Reem Abdellatif at reem.a@argaam.com
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