It comes as a new International Monetary Fund report warns Middle Eastern countries they stand to lose half a trillion US dollars in the oil markets this year.
After decades of relying on cheap-to-produce oil, Saudi Arabia’s government has revealed a plan to transform the economy to a future without oil.
About 80 per cent of the kingdom’s revenue comes from oil, but it has been hit by falling prices in the past year.
The government ran a record budget deficit of nearly US$100 billion last year.
Deputy crown prince Mohammed bin Salman says the plan aims to double the size of the economy to US1.6 trillion by 2030.
“Today, our constitution is based upon the Holy Book and on oil. This dependency on oil is very dangerous. We have a kind of oil addiction in the kingdom. This stopped the development of many sectors during the previous years.”
One part of the plan will see up to five per cent of shares sold in state-owned oil giant Aramco, to create a US$2 trillion sovereign wealth fund.
That would make it the largest wealth fund in the world – equivalent to double the size of oil-producing countries Abu Dhabi and Norway.
The plan will also create a ‘green card’ system within five years to allow expats to invest in the country or buy houses.
Prince Salman says the funds raised will help develop the local manufacturing, technology, tourism and mining industries.
“The plan’s ambitions will swallow these issues: unemployment, housing and other problems. Our ambition is how we can further develop the economy, and how we can create an attractive environment in our country in order to be proud of our nation – and to be part of development on economic, environmental, cultural, and intellectual levels.”
The International Monetary Fund has called the plan an ambitious, far-reaching effort.
Masood Ahmed is the IMF’s Middle East director.
“What is clear is that it envisages not just an effort to try and balance the fiscal outlook for Saudi Arabia over the next five years by raising revenues and cutting back spending, but it also looks at how to transform the economy away from being so dependent on oil. Those are welcome objectives and that is exactly the kind of transformation that an economy like Saudi Arabia needs.”
A new report by the IMF finds oil-exporting countries in the Middle East lost US$390 billion in revenue due to lower oil prices last year, and should brace for even deeper losses of around US$500 billion this year.
Masood Ahmed says restructuring Saudi’s economy away from oil won’t be easy.
“It is going to be a challenge to implement all of these things, and I think the real issue is going to be how to make sure that these very sensible and ambitious objectives can be translated into real changes through implementation, and through putting in place the institutional frameworks that will support that transformation.”
Analysts say the plan will need buy-in from groups across society, including from women who are not allowed to drive – the only country in the world where that is the case.
John Sfakianakis is a former advisor to the Saudi economic minister, and director of the Gulf Research Center.
He’s told the BBC he’s optimistic the country can make the transition.
“I think because of necessity and the need to modernise the country. And also because prince Mohammed bin Salman is thirty years of age, he does see more than what his cousins, who are much older, see. So he does believe that the country does need to open up to tourism, religious tourism, archaelogical tourism. There are fantastic sites that can be visited. I think eventually the drive will be to open more and more this country.”