Saudi launches austerity plan with 5% spending cut

Ministries and state bodies will reportedly reduce the value of their outstanding contracts "by not less than 5%" as finance ministry approvals are made compulsory

Saudi's finances have been hit by low oil prices. [Representational image]
Saudi's finances have been hit by low oil prices. [Representational image]

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. 



Most popular


Deadline approaches for CW Oman Awards 2020 in Muscat
You have until 20 January to submit your nominations for the ninth edition of the


CW In Focus | Inside the Leaders in KSA Awards 2019 in Riyadh
Meet the winners in all 10 categories and learn more about Vision 2030 in this
CW In Focus | Leaders in Construction Summit UAE 2019
A roundup of Construction Week's annual summit that was held in Dubai this September

Latest Issue

Construction Week - Issue 765
Jun 29, 2020