According to the IMF, cheap oil cost Middle Eastern economies $390 billion in 2015. The loss may leap by an additional $150 billion in 2016. Saudi Arabia, one of the major oil producers in the region, recorded large budget deficits.
The kingdom burned through almost $62 billion of its foreign currency reserves and had to borrow $4 billion from local banks, a first since 2007.
The IMF predicted the country will go bankrupt in five years at the current pace.
This called for drastic changes in the kingdom’s economic as well as foreign policies. Under a reform plan called Vision 2030, Saudi Arabia plans to diversify its economy over the next 14 years and build up its Public Investment Fund.
In such dire times, it’s the young blood of the ruling Saud clan that is coming to the rescue. Saudi Arabia’s 30-year-old Deputy Crown Prince Mohammed bin Salman is overseeing some major changes in times to come.
The changes, though quite radical, are envisioned to help the kingdom survive the economic crash.
Prince Mohammed bin Salman recently announced that Saudi Arabia was working on a "green card" system within five years to give expatriates long-term residence. This would give them more rights to expatriates to invest in the country.
"Almost 10 million foreigners send their money back to their country, they can't invest in this country, so by this green card idea, we are giving more rights to expats for investment or buy houses," says Salman al-Ansari, founder and president of the Washington, D.C.-based Saudi American Public Relations Affairs Committee.
Selling Off Oil Shares
Saudi Arabia plans to sell shares in state oil giant Aramco, earning around could raise $100 to $150 billion, and set up the world's largest wealth fund in line with the plan.
The deputy crown prince also has high hopes for Vision 2030. “By 2020, we’ll be able to live without oil,” he predicts.
Another plan to aid economy is tourism. A large number of Muslims visit the kingdom every year for religious pilgrimage; it also earns the country huge revenues.
Prince Sultan Bin Salman, president of Saudi Commission for Tourism and National Heritage, launched the Post-Umrah (pilgrimage) Program, an initiative which allows Umrah pilgrims to convert their visas into tourist visas.
What better way to earn some cash than to extend the net of tourism revenue?
For economic reforms of any sort to succeed, collaboration of the entire society is imperative — not just that of the male population. The dire economic decline and the resultant emergency may just hail a time that brings Saudi women much needed freedom and opportunities. The Vision 20130 program looks toward increasing female participation in the workforce from 22 percent to 30 percent — a number that would lower the rate of unemployment from 11.6 percent to 7 percent.
"With over 50 percent of our university graduates being female, we will continue to develop their talents, invest in their productive capabilities and enable them to strengthen their future and contribute to the development of our society and economy," the press release stated.
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Thumbnail/Banner Credits: Lucy Nicholson/Reuters