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PricewaterhouseCoopers is advising Saudi Arabia on US$20 billion worth of projects it could cancel in order to reduce the budget deficit it had amassed with the low oil prices of the past two years, Bloomberg reports, quoting two sources in the know.
The Saudi Ministry of Economy and Planning has hired PwC to see which one-third of US$69 billion worth of government projects it could kill. The projects that the ministry and the global consultancy firm are reviewing include housing, health, education and transport contracts.
PwC is also said to be advising the Saudis on how to reduce costs of projects or put them up for privatization, Bloomberg’s sources said.
Reports that Saudi Arabia is looking for ways to slash around US$20 billion in projects first emerged in September of last year. Two months later, Saudi media reported that Saudi Arabia’s governing economic body, Council of Economic and Development Affairs (CEDA), had cancelled US$266.7 billion in projects that were not expected to accelerate the kingdom’s growth or improve the living standards for its people.
At the end of July last year, the International Monetary Fund (IMF) expected Saudi Arabia’s fiscal deficit to drop to 13 percent of GDP in 2016, from a massive 15.9 percent deficit booked in 2015.
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In its budget plan for 2017, Saudi Arabia said that the 2016 deficit was lower than the 2015 shortfall in nominal value, but did not provide figures as to how the billions of Saudi riyals stacked up as percentage of GDP. For 2017, percentages are given, with the deficit expected to drop further to 7.7 percent of GDP in fixed prices, and financed by the issue of new debt instruments and drawing from reserves.
This year the Saudis also expect oil revenues to grow by 46 percent compared to 2016 projections, and non-oil revenues also to increase, by 6.5 percent. Still, non-oil revenues expected for this year are more than half the amount of the projected oil revenues.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.