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Saudi Arabia to cut $8bn from Vision 2030 project as part of austerity plan

Coronavirus and collapsing oil prices have severely damaged Saudi Arabia's economic outlook
Saudi women stand next to the Saudi pavilion (vision 2030) at the Gitex 2018 exhibition (AFP)

Saudi Arabia's much-touted Vision 2030 project is to be cut by $8bn as part of austerity measures designed to wean the country off its reliance on oil.

According to the Okaz newspaper, the collapse in the price of oil has meant deep cuts to expenditure on programmes and mega-projects in the kingdom.

Though the Vision 2030 project, which is aimed at modernising and diversifying the Saudi economy, is still set to go ahead, there will be a reduction in the budget, said Okaz, citing people familiar with the matter.

The Saudi newspaper said that the salaries of state employees would be unaffected by the cuts.

Minister of Finance Mohammed al-Jadaan announced a 100 billion riyal ($27bn) austerity programme on Monday to cope with the downturn caused by low oil prices and the coronavirus pandemic.

"It has been decided that the cost of living allowance will be halted from June 2020 and VAT will be raised from 5 percent to 15 percent from 1 July," Jadaan said in a statement released by the official Saudi Press Agency.

Brent crude is currently trading at $30 a barrel, around half the level it was when the kingdom announced its budget in December.

On Tuesday, Saudi Aramco posted a 25 percent slump in first-quarter profits, saying the coronavirus crisis would weigh heavily on demand in the year ahead.

"The Covid-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment," CEO Amin Nasser said in a statement, according to AFP.