07/09/2015
Expanding projects in 2016 requires issuing bonds to pay the costs
an official source at the Ministry of Economy and Planning, said that the numbers and ratios that has been reviewed by the International Monetary Fund about the Saudi economy did not depart from the expectations. He stressed on taking numbers from their sources to ensure that expectations are not far from reality or future outcome. He concluded by saying: there are specialized agencies that release reports about the financial, monetary and economic numbers monthly, and quarterly. Despite the decline in oil prices, however, the financial policies followed in Saudi Arabia will ensure economic stability.
He pointed out the need to codify projects by finding a funding mechanism that is purely economic. He said bonds should be traded in the local market to fund essential investment projects, on the condition of repaying from the revenue of those projects. For example, the energy projects especially the service ones that requires vast investments can be created according to economic criteria, then bonds will be traded in order to finance those projects, on condition of repaying those bonds from the revenues of these projects.
He stressed that issuing bonds is one of the most important actions taken by the Saudi government, as the ratio of debt to GDP does not exceed 1.6 percent. He added that the government could take advantage of the liquidity derived from these bonds, because using these bonds will put pressure on inflation, since the high cost of living is caused by the liquidity in the market, thus, reducing the cash flow in the market would impose some control on inflation.
He added, to make this bonds issuing process optimal, one important condition has to be achieved, which is for the revenues of the financial reserves invested overseas to exceed the interest paid by the Kingdom on the bonds they borrowed from the inside. Because it is important that the revenue of the investment is bigger than the interest that was paid for the loan.
He spoke about the issue of focusing on what he called (the efficiency of government expenditure). He said, the meaning of efficiency of government expenditure is to utilize every riyal spent by the government and to address some of the corruption issues of in the public sector especially in the enterprise sector, as it is important to resolves these issues.
As for what the International Monetary Fund said about expanding non-oil revenue scale, he said that the Fund focused in its report on the value-added tax, and land tax only, and here I say we can achieve more revenue without resorting to taxation, since it is an easy option for governments that provide services people need. For example, many government sectors can double its revenues, such as ports, and airports but have not yet achieved its full potential. He added that there are sectors in the country that have not been invested yet, such as the tourism sector. Investing in this sector could increase the total revenue of the country has the government put a little investment in it, However, this sector has not been fully utilized yet, despite the efforts and plans of the Saudi committee for Tourism and national heritage.
He added that what the International Monetary Fund has said is true to an extent, we have said it already, we actually have been saying it for 10 years, when we called for developing a backup plan that leads to deserting the oil revenue. , and for a decade has not changed anything makes the government is relying on government revenues. All through this decade, nothing was developed to make the government rely less on governmental revenues. Moreover, on the impact of these revenues on the public sector, he said the government is creating jobs for Saudis, and this increases the financial burden in light of the absence private sector role in this process. The private sector should participate actively by creating more jobs for Saudis to reduce the financial burden associated with the employment process, as it is important for the private sector to have a prominent role in the gross domestic product process.
He added that what the International Monetary Fund has said is true to an extent, we have said it already, we actually have been saying it for 10 years, when we called for developing a backup plan that leads to deserting the oil revenue. , and for a decade has not changed anything makes the government is relying on government revenues. All through this decade, nothing was developed to make the government rely less on governmental revenues. Moreover, on the impact of these revenues on the public sector, he said the government is creating jobs for Saudis, and this increases the financial burden in light of the absence private sector role in this process. The private sector should participate actively by creating more jobs for Saudis to reduce the financial burden associated with the employment process, as it is important for the private sector to have a prominent role in the gross domestic product process.
He concluded by saying that the kingdom of Saudi Arabia has large reserves, which can be utilized in improving the income sources and increasing financial returns to convert several government sectors to productive sectors to help diversify the economy and sources of income to cope with future risks.
