As part of a plan to stimulate an economy squeezed by low oil prices and spending cuts, Saudi Arabia Finance Minister, Mohammed Al-Jadaan said, that the country may offer “almost interest-free” loans to companies in labor-intensive industries.
Al-Jadaan said in an interview on Thursday in Washington, where he’s attending International Monetary Fund and World Bank meetings that the officials are in talks with private companies about other kinds of government support too. He said that the end of the second quarter is probably the time by when the proposal will likely be ready.
An unprecedented shakeup of an economy that’s heavily reliant on oil is how Saudi Arabia describes the plan that it has embarked upon. Including plans to sell shares in state companies and curb government spending, the Deputy Crown Prince Mohammed bin Salman announced the so-called Vision 2030 last year.
Creating jobs for the kingdom’s youthful population is also a strong focus for the Saudi government. Foreigners will be barred from working in shopping malls, a move expected to put 35,000 Saudis into work, the Saudi authorities said earlier on Thursday.
Easing the impact of higher domestic energy prices as subsidies are cut, the new lending program will help companies restructure debt, Al-Jadaan said.
He said that authorities are also asking companies “what do you need from the government side, what are the issues you’re suffering in terms of licensing, procedure?”
Al-Jadaan said, without giving details that Saudi Arabia is likely to return to domestic and international bond markets this year after a successful sukuk sale. Rather than draw on its reserves, the government prefers to borrow, he said.
Al-Jadaan said that the decline in reserves in the first two months may have been a result of private companies settling overseas bills or financing imports and the government didn’t tap the central bank’s foreign-exchange holdings in the first quarter of this year.
On the other hand, Labor Ministry spokesman Khaled Aba Al Khail told the Al Arabiya news channel that Saudi Arabia’s decision of not allowing foreigners from taking jobs in the country’s shopping malls is expected to generate about 35,000 jobs, and companies will be given sufficient time to deal with foreign labor contracts. According to a statement posted on the official Saudi Press Agency, market conditions will determine how and when it goes into effect.
A key component of the kingdom’s plan to end the economy’s oil dependence and reliance on expatriate labor is job creation for Saudis and was made so by Deputy Crown Prince Mohammed bin Salman. However, making it especially hard for young Saudis — nearly half of the population is under 25 — to find work as the government cuts costs and growth slows and hence that priority is challenging in the short-term.
From 11.5 percent a year earlier, the unemployment rate for Saudi nationals rose to 12.3 percent in the fourth quarter. For Saudi women, the rate was 34.5 percent.
An earlier order that limited employment in shops that sell women’s items to Saudi women would have to be complied to by business, the ministry’s decision specified.
(Adapted from Bloomberg)