Dubai - Saudi Arabia will spend at least half the money it raises by
selling shares in the state oil company on domestic investments, Deputy Crown
Prince Mohammed bin Salman said in a rare televised address to a nation
that’s shown signs of uncertainty over his austerity plans.
The Saudi sovereign wealth fund will use proceeds from the
initial public offering in Saudi Aramco to develop domestic arms manufacturing,
the mining industry and the entertainment sector, Prince Mohammed said in an
interview on state television. He said the share of IPO profits to be spent
within the kingdom “won’t be below 50 percent, and could reach 70 percent.”
The share-sale is due to take place next year. Without it,
the kingdom could take decades to develop its economy and new industries, he
said.
Prince Mohammed, 31, used the interview to highlight planned
investments, cash transfers and construction projects that he says will help
revive an economy stuck in the worst slowdown since 2009.
Excluding oil, Saudi output barely grew last year after the
government slashed spending and suspended some allowances for state employees,
a significant change for a public accustomed to generous handouts.
‘That isn’t true’
Some Saudis have complained privately and on social media
about lower incomes and higher costs, and there were online calls for protests
on April 21, spurring authorities to take unusual policing measures in the
capital Riyadh.
The day after, King Salman reversed some of the cuts,
ordering the resumption of bonuses and allowances for state employees that had
been suspended in 2016.
That decision was possible because austerity measures
succeeded in their goal, helping the country avoid recession and reducing the
budget deficit sufficiently that the perks can now be resumed, Prince Mohammed
said in the interview.
Wealth Fund, Spending and IPO: Key Remarks by Prince
Mohammed “The suspension of allowances was temporary and was to be reviewed
periodically,” he said. “It was reviewed in the appropriate time after our oil
revenue improved.’’
The prince rejected the idea that public pressure had played
any role. “That isn’t true,” he said. “The deficit fell 44 percent below our
projections. Why? Because of austerity measures.” He also said that the
government’s non-oil revenue exceeded expectations in the first quarter of this
year.
Oil, which had dropped to the lowest in more than a month,
extended declines after the prince’s comments before recovering on Wednesday.
Royal countdown
It was the second time that Prince Mohammed, who’s amassed
unprecedented powers over everything from defence to the economy since his
father became king in 2015, has addressed the Saudi public via domestic
television. On the previous occasion, in April last year, he announced details
about the Vision 2030 plan to transform the Saudi economy.
On state television, the build-up to the event stretched out
for hours. The broadcaster showed a clock counting down second-by-second toward
the interview’s start time, along with a picture of Prince Mohammed, as local
commentators extolled his transparency and willingness to communicate directly
with his people.
Prince Mohammed said that all reform measures have
side-effects. “These new programs, which are being launched, will start
yielding results by the end of 2017 and more strongly in 2018 and 2019,’’ he
said.
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He cited the effort to build a defence industry, saying that
Saudi Arabia spends as much as $70 billion a year on its military and aims to
include local content in all its arms deals.
The government also plans home-building programs, with
housing to be made available free or at low cost to poorer Saudis, Prince
Mohammed said.
The government, which has recently turned to local and
international bond markets, has room for more borrowing to finance spending,
though it won’t allow debt to exceed 30 percent of gross domestic product,
Prince Mohammed said.