RIYADH: Saudi Minister of Finance and Acting Minister of Economy and Planning Mohammed bin Abdullah Al Jadaan has said the kingdom has faced the Covid-19 crisis from a position of strength.
He said this during an interview on Al Arabiya television channel about the financial precautionary measures for the coronavirus pandemic, said a report by the state news agency SPA.
“The beginning of this year, the global coronavirus pandemic emerged with huge health and economic impacts. The kingdom has been able to take firm and quick steps to maintain the safety of people and citizens, and to provide resources to the health sector,” he said.
Al Jadaan pointed out that the results of the first quarter have certainly not shown the pandemic’s impact on a significant level.
“The precautionary measures taken by the government, and the significant results of those steps on the economy and on public financing, both globally and within the kingdom, these will show in the second, third and fourth quarters depending on developments in the health and economic sectors, indicating that the kingdom is committed to public finance and sustainability, and has enough financial strength to face this crisis even if it is prolonged.”
He said, “There has been a significant drop in revenues, and we will likely see its impact in the coming quarters, whether in oil revenues, as the kingdom began the year with oil prices higher than $60 per barrel; these days we are seeing the numbers near $20 and this huge drop leads to oil revenues dropping by more than half.”
“Non-oil revenues will also drop due to the precautionary measures, which have caused a huge reduction in economic activity. We have to deal with this wisely and efficiently and the kingdom will be looking at several options to face a pandemic the world has never seen for more than 70 years.”
On the question about the items that will be affected by the expected decrease, Al Jadaan said the government will decide to reduce spending on projects, whether major ones or some of the programmes aimed at achieving Vision 2030, as well as travel expense, duties, etc.
Al Jadaan said that they are also considering other items as long as they don’t touch basic necessities of the people.
The minister said that the government will take strict measures, which may be painful, but are necessary for public financial stability.
Al Jadaan said the government has taken measures that show a great ability to make decisions at the right time before it is too late.
He said Saudi Arabia was affected on a larger scale because it largely depends on oil. “The kingdom’s Vision 2030 aimed to solve this issue by diversifying the sources of revenue. However, it still largely relies on oil revenues,” He added that oil revenues have decreased by more than half, and non-oil revenues have also decreased as a result of economic sectors being disrupted.
“We must be careful in managing public finances to provide basic necessities in case this crisis continues,” he said.
On the Saudi investments abroad, Al Jadaan said the government was managing the public funds in an efficient manner, and has reserves.
He pointed out that Saudi Arabia used over one trillion riyals during the four or five previous years to cover the deficit. The investments are highly important because they have returns that are used in case of a crisis to curb the deficit.
Al Jadaan said that these types of crises create investment opportunities, as many companies reduce their investments, which creates opportunities to invest in them.
He also said that the oil price is not predictable as it is regulated by supply and demand, and the oil markets are the ones that set the prices.
He stressed that liquidity in the banking sector is very high, as it was seen in reports from international monetary organisations, and the Saudi Arabian Monetary Authority and the banks are capable of managing liquidity and providing for the needs of the private sector.
Al Jadaan said, “The economic, public finance challenges that we are seeing are great, and the world and Saudi Arabia will not go back to pre-coronavirus conditions in term of economy, because there have been many changes, both in normal economic activities and supply chains, and in the prices and costs of services and materials.”
The minister said there are teams working to identify the risks and find opportunities that we can utilise. He stressed that the country depends largely on public finance, and the Saudi economy still depends greatly on public spending.
“Therefore, we have to maintain public finance so that we can continue to support the economy for the years to come,” Al Jadaan said.