IMF Urges Saudi Arabia to Contain Spending, Wages Despite Oil Price Rise

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The organisation says a rise in spending would expose the Saudi budget if there was an unexpected drop in oil prices.

DUBAI (AFP) — The IMF on Friday warned Saudi Arabia against boosting spending in the wake of rising oil prices, urging the world’s top crude exporter to also contain its wage bill.

The International Monetary Fund said in a report that a rise in spending would expose the Saudi budget if there was an unexpected drop in oil prices.

The report emphasised “the importance of ensuring that spending remains at a sustainable level in different oil price environments” and the need to avoid a fiscal policy that would create undue volatility in economic activity.

Oil prices have rebounded strongly after major producers decided to cut output in late 2016. In June, they decided to raise production again.

Saudi revenues jumped 67 percent in the second quarter of 2018, mainly due to a sharp rise in oil income.

In the same period, public spending surged 34 percent, according to government figures.

Around half of state spending goes on the public wage bill, according to the IMF which suggested “the workforce could be gradually reduced through natural attrition”.

Saudi authorities told the IMF that the civil service system is under revision with the help of the World Bank.

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