Saudi Arabia’s King Salman has decreed several sweeping changes to the government and has reinstated perks for civil servants that were removed last year amid the low oil prices. Now, Saudi state media report, budget revenues for the first quarter have turned out higher than expected, which has made the move possible.
The king removed three ministers from their positions, including the top officials for civil service, information, and technology. Salman also fired the head of the Saudi army, Eid al-Shalwi, replacing him with Fahad bin Turki. Further, he appointed one of his sons as ambassador to the U.S., replacing the incumbent who’d only spent a year at the position.
In the public sector, which employs two-thirds of working Saudis, King Salman restored “all allowances, financial benefits, and bonuses,” that were removed last September along with a 20-percent cut to the salaries of ministers.
The decrees come amid brewing protests and calls for rallies against the spending cuts in four Saudi cities. Along with the calls for the restoration of perks, a Twitter campaign with the hashtag “April 21 movement” also urged the government to stop the partial privatization of Aramco and bring back the religious police.
After the new decrees, the situation is bound to quiet down and the fiscal position of the Kingdom should improve, government officials told Reuters, saying that trade deficit is seen to decline this year and even dissipate completely, replaced by a surplus before the end of the year.
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At the same time, Bloomberg reports that two international banks, Credit Agricole and RBS, are selling their Saudi interests, but there are no suitors. This puts a question mark over Riyadh’s economic diversification plans that include boosting non-oil industries with a major focus on renewable energy.
Theoretically, this should pique the interest of investors willing to gain exposure to Saudi Arabia through its financial institutions. In reality, this is not happening, as banks are naturally extremely vulnerable to the Kingdom’s current and potential future economic problems.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.