At the conclusion of the mission, Mr. Callen made the following statement:
“Saudi Arabia has embarked on a bold reform program under Vision 2030. The reforms aim to diversify the economy, give a larger role to the private sector, increase the number of jobs for Saudis in the private sector, and adjust fiscal policy to ensure macroeconomic stability. The reforms are ambitious and further efforts on effective prioritization, sequencing, coordination, and communication will be needed to maximize the chances of their successful implementation.
“The government is adapting its fiscal policy to lower oil prices. The aim of bringing about a large, sustained, and well-paced fiscal adjustment to achieve a balanced budget is appropriate. The target of balancing the budget, however, does not need to be met in 2019 as set out in the Fiscal Balance Program (FBP) given Saudi Arabia’s strong financial asset position and its low debt. A more gradual fiscal consolidation to achieve budget balance a few years later would reduce the effects on growth in the near-term while still preserving fiscal buffers to help manage future risks.
“Energy price reforms are a key priority, but there is scope for a gradual implementation to give households and businesses more time to adjust. The household allowance is a welcome and powerful tool to support low- and middle-income households as energy prices increase, while support to industry should be available on a limited, temporary, and transparent basis. Successfully implementing non-oil revenue reforms such as the excises and VAT is very important.
“The recent steps to increase the transparency of fiscal policy through the publication of the Fiscal Balance Program and the First Quarter Budget Report are very welcome. This greater transparency will help private businesses and investors better plan their investment and employment decisions.
“The authorities are beginning to make good progress in identifying and reducing obstacles to private sector growth, including by reducing custom clearance times, making it easier to start a business, and moving toward completion of the new bankruptcy and commercial mortgage laws. In collaboration with the business community, these efforts should continue.
“Additional reforms are expected to be announced in the coming months to boost the private sector, including an ambitious privatization and PPP program to reduce the role of the government in the economy.
“Creating more jobs for Saudi nationals in the private sector is essential. A national dialogue between the government, businesses, and those who want to work or take entrepreneurial opportunities could help find solutions to the jobs challenge that are tailored for all. Consideration needs to be given to how to increase the competitiveness of Saudi workers in the private sector. Allowing greater mobility of expatriate workers in the economy would help close the wage gap between Saudi nationals and expatriates.
“Encouraging more female employment will have a positive economic impact. Women are as well educated as men, and their participation in the labor force has been increasing in recent years. However, the level is still low which means that their skills and endeavors are not contributing as much as they could to the growth and productivity of the economy.
“Banks are well regulated and supervised, and SAMA has successfully managed emerging financial sector risks over the past year. Efforts by the Capital Market Authority to develop the local capital markets are very welcome and will provide more financing and saving opportunities in the domestic economy.
“The exchange rate peg to the U.S. dollar continues to serve Saudi Arabia well given the structure of the economy.
“We would like to thank the authorities for their warm hospitality, cooperation, and discussions during our visit.”
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