News / Business

Cash-strapped Saudis launch austerity drive

Tuesday, 15 March 2016 2:38 AM [ Last Update: Tuesday, 15 March 2016 2:36 AM ]

Saudi King Salman bin Abdulaziz watches troops taking part in the Northern Thunder military exercises in Hafr al-Batin, 500 kilometers northeast of Riyadh on March 10, 2016. (AFP)

Saudi Arabia’s cash strapped government has launched fresh austerity measures and ordered ministries to cut contract spending by at least five percent.

The order was sent to all ministries and state bodies telling them to cut the value of all contracts present in the 2016 state budget by "not less than five percent of remaining obligations," Reuters reported on Monday.

The kingdom is facing a budget deficit of nearly $100 billion caused by a sharp slump in oil prices as well as Riyadh’s rising army expenditure, a large amount of which is being funneled into a military campaign against Yemen where at least 8,400 people have been killed and over 16,000 injured.

The new measures were introduced by the ministry of economy and approved by Saudi Arabia's King Salman bin Abdulaziz Al Saud to "rationalize spending and increase its efficiency."

It also mandates that government bodies gain permission from the finance ministry before engaging in new contracts.

The Saudis are selling off foreign assets and issuing domestic bonds in an effort to shrink the deficit and shore up cash reserves, which experts have warned would only last a few more years at their current rate of decline.

On Thursday, Riyadh reportedly asked international banks for a loan of up to $8 billion along with an option to increase the amount.

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