Saudi launches austerity plan with 5% spending cutby Neha Bhatia on Mar 15, 2016
Saudi Arabia's government has reportedly launched an austerity drive, which entails a 5% cut on contract spending.
The Kingdom has grappled with low state revenues as global oil prices dwindle, leading to reduced petrodollars for the country.
In this context, the austerity drive could further dampen economic growth, especially in the Saudi construction sector.
The document, which has been circulated amongst ministries and state bodies by Saudi's central government, "instructs them to reduce the value of their outstanding contracts" and construction contracts included in the 2016 Saudi budget, by "not less than 5% of remaining obligations", The Guardian reported.
Citing Reuters, the UK daily said these measures were proposed by Saudi's economy and planning minister "rationalise spending and increase … efficiency", and were approved by King Salman.
The document allows ministries to work out a reprioritisation and revision plan of their contracts to achieve required savings, but does not explain how negotiations with suppliers might proceed, the report added.
Furthermore, ministries and government bodies are now forbidden from signing contracts without the approval of the finance ministry.
Senior officials were previously permitted to agree small contracts without approval, the report said.