The Kingdom Tower stands illuminated at night on King Fahad Road in Riyadh (file). Saudi Arabia’s finance ministry has told government departments not to contract any new projects and to freeze appointments and promotions in the fourth quarter, according people with knowledge of the matter.

Bloomberg/Riyadh

Saudi Arabia is ordering a series of cost-cutting measures as the slide in oil prices weighs on the kingdom’s budget, according to two people with knowledge of the matter.
The finance ministry told government departments not to contract any new projects and to freeze appointments and promotions in the fourth quarter, the people said, asking not to be identified because the information isn’t public. It also banned the buying of vehicles or furniture, or agreeing any new property rentals and told officials to speed up the collection of revenue, they said.
With oil accounting for about 90% of revenue in the Arab world’s largest economy, a drop of more than 40% in crude prices in the past 12 months has combined with wars in Yemen and Syria to pressure Saudi Arabia’s finances. While public debt is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2% in 2014, that may rise to 33% in 2020, according to estimates from the International Monetary Fund.
“In order to demonstrate a bit of fiscal discipline the government needed to take some measures in Q4 to moderate spending,” John Sfakianakis, a Riyadh-based Middle East director at Ashmore Group, said by phone. “Going forward, Saudi Arabia will have to implement spending cuts and efficiencies in order to avoid a runaway fiscal deficit in 2016.”
To help shore up its finances, authorities plan to raise between 90bn riyals ($24bn) and 100bn riyals in bonds before the end of the year, people with knowledge of the matter said in August. The kingdom’s net foreign assets fell for a seventh month to $654.5bn in August, the lowest level in more than two years. That’s down from a record $737bn a year earlier.
Economic growth in Opec’s biggest oil exporter will probably slow to 3% this year from 3.6% in 2014, according to the median estimate of economists on Bloomberg.
Brent, a benchmark for more than half the world’s crude is down about 10% this year.
The finance ministry declined to comment. The government was working with advisers on a review of capital spending plans, people familiar with the matter said in August.
The kingdom’s benchmark equities gauge, the Tadawul All Share Index, has dropped 7.8% this year amid the decline in crude. While Saudi Arabia’s riyal has been pegged to the dollar for almost 30 years, one-year forward contracts for the currency are trading near the highest since 2003, signalling some traders are increasingly betting it could weaken.