Despite the rapid rise in oil prices in recent months, the financial system in Saudi Arabia there is a very alarming situation.
The lack of money, it seems, is growing, and as a result, financing becomes more expensive. Three-month rates in the interbank market of the country exceeded 2%, reaching highs since 2009
Can we assume this jump steady trend? Apparently, Yes. As evidence – presented on Monday a plan of measures to diversify the economy and liberate the country from dependence on oil.
“We hope that citizens will work together to achieve the goal of “Saudi vision 2030,” said king Salman about the development strategy of the Kingdom for the coming 15 years.
Deputy crown Prince of Saudi Arabia, Muhammad bin Salman, a 30-year-old son of the king of the country, revealed details of the plan:
1. The share of non-oil exports in non-oil GDP of Saudi Arabia should be increased from 16% to 50%.
2. The plan envisages diversification of the economy, including the localization of renewable energy sources and the production of industrial equipment. It is planned, furthermore, the creation of 90 thousand jobs in the mining industry.
3. The development of the tourism industry, attractions. It is also planned to simplify the procedure for obtaining visas.
Economic details of the plan – the program of reforms of the budget, regulatory changes and policy initiatives for the next five years. The so-called “national transformation plan” will be released, expected in the next four to six weeks.
In other words, developing such a plan, the Saudi authorities give to understand that not expected in the coming years strong growth in oil prices. But once the price of oil will remain at a low level, hence, the need for funding will continue.
The same opinion is shared by many experts.
In June 2014, a barrel of Brent crude oil, the main varieties in the international oil markets, was $115. It’s been less than two years, and today its price is $45 or even less.
It is not surprising that such a collapse was a real shock for Saudi Arabia and the oil sheikhs of the Persian Gulf. These countries receive approximately 85% of their income from oil.
However, as he writes in his article on Project Syndicate economist of the International financial center Dubai Dr. Nasser Saidi, the governments of these countries should realize that the current fall in prices, unlike previous ones, will not be temporary.
Saudi Arabia and other Gulf countries should seize the opportunities afforded by this crisis. They have a great chance to hold, finally, a comprehensive economic reform.
The aim of these countries should become a new development model that will free them from dependence on hydrocarbons. Financial cushion, thanks to former accumulated oil revenues, is able to provide the six members of the cooperation Council for the Arab States of the Gulf (GCC) is a brief period of calm. However, they should use this window of opportunity to start structural reforms that are needed to ensure sustained economic growth, macroeconomic stability, efficient and balanced exploitation of oil and gas fields.
