Report confirmed International Monetary Fund Saudi Arabia’s opposition to the recommendations to abolish the local gasoline price ceiling.
The fund added that the Saudi government stressed the importance of maintaining social cohesion.
The IMF report indicated the Kingdom’s emphasis on the importance of ensuring that industries continue to bear the cost of production, and “maintaining social cohesion and ensuring the industries’ ability to bear costs while the Kingdom seeks to promote the development of the private sector.”
According to the report; Directors welcomed the government’s commitment to fiscal discipline and budget caps for 2022 despite high oil prices.
To support fiscal consolidation and the transition to a greener economy, Directors emphasized the need to continue energy price reforms, including a review of the gasoline price ceiling, and welcomed the government’s commitment to reach the level of market energy prices by 2030.
Directors commended the government’s ongoing reforms to strengthen social safety nets through targeted programs, which will help sustain energy price reforms.
The assurances of the International Monetary Fund came within a positive report on the Saudi economy at the conclusion of the Article IV consultations for the current year.
The Fund stressed the strength of recovery from the repercussions of the Corona pandemic, thanks to the strength of liquidity and public finances, the momentum of reforms within Vision 2030, in addition to high oil prices, strong growth rates, success in containing inflation, and the solidity of the financial sector.
The IMF stated that the growth rate in 2021 amounted to 3.2%, driven by the recovery of the non-oil sector with the high rates of employment of the Saudi workforce, and the increase in women’s participation. The Fund expects the growth of the Saudi economy to reach 7.6% this year, despite the tightening of monetary policy and financial control and the repercussions of the war in Ukraine, which remain limited.
In the medium term, growth is expected to pick up as a result of reaping the benefits of continued implementation of reforms.
The IMF expected non-oil GDP growth to reach 4.2% this year and 3.7% next year.
For his part, Mazen Al-Sudairi, head of research at Al-Rajhi Capital, said that the International Monetary Fund report shows an increase in petroleum GDP by 16% during the current year.
Al-Sudairy added in an interview with Al-Arabiya that the IMF’s expectations suggest an increase in government spending than was estimated by 6.5% to 1.018 trillion riyals in the current year.
He stated that the Fund’s expectations of inflation in Saudi Arabia at 2.8% is not a large number, adding that raising energy prices will raise inflation levels and affect the service and retail sectors, so the Kingdom did not comply with the IMF’s recommendation to cancel the ceiling on gasoline prices locally.