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Oil price falls force Saudi Arabia to cut contract spend in new austerity drive

Saudi Arabia's government, its finances strained by low oil prices, is opening a fresh austerity drive by ordering ministries to cut their spending on contracts by at least 5 percent, a document seen by Reuters shows.

The spending cuts could further slow economic growth in the world's top oil exporter and hurt the construction industry, where many companies are struggling with deteriorating cash flow and rising labor costs.

The document, sent by the central government to all ministries and state bodies, instructs them to reduce the value of outstanding contracts signed to support their operations, as well as construction contracts included in the 2016 state budget, by "not less than 5 percent of remaining obligations".

It says these measures were proposed by the minister of economy and planning to "rationalize spending and increase its efficiency", and were approved by the king.

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