The austerity policy that was imposed upon Saudi Arabia four years ago has finally come to an end. This policy saved the country from a high paced economic crisis, which was caused by a growing deficit and a decrease in oil revenues. The imposition of this policy was carried out in spite of increased terrorist bomb threats. Moreover, most economic reports had warned against the impossibility of paying the mounting debts and interest rates, which were threatening the market and government altogether.
The severe austerity programme was a harsh test, however the results, such as the decrease in debt, stake issuance and governmental borrowing, made the suffering worthwhile. The policy resulted in the canceling of many major agreements, a decrease in governmental obligations and the halting of many unnecessary projects; this was all in addition to the restructuring of aid programmes. There were however many parties that opposed the introduction of the austerity policy, and others that claimed that they country had not had to face such a situation since the early 1960s.
The Saudi Crown Prince, who adopted the austerity policy, chose to confront and mend the crises at hand. He did not want to delay the process and risk escalating the problem. The result is that this austerity policy has given the government a chance to reconsider and reform, thus eliminating any extra luxuries.
The government sold institutions, such as the communications institution, an action which was in the best interest of the market. In the meantime, the private sector was allowed a greater role in offering substitutive services. This allowed all sectors to work collaboratively to solve problems such as unemployment, rehabilitation and to improve the quality of education.
The root of the problems in Saudi Arabia can be located back to the high war expenses in Kuwait and the severe decrease in oil revenues since the mid 1980s. The situation was escalated by the fact that 98 percent of oil revenues were insufficient to cover governmental obligations. It was at this time that Prince Abdullah recognized that the situation would need to be confronted. The implementation of the austerity policy was extremely strict, even when the price of a barrel of oil reached $30. The government continued to construct a policy on the basis that the barrel cost $18, and redirected the surplus to settle the outstanding debts.
The government recognized that it was important to cut expenses, reconsider its obligations, activities and the credibility of its bodies, in addition to enhancing its performance. The oil prices may have soared at the right time, however oil will not be the “magic potion” it was in 1981. All the countries in the region consider oil to be their primary source of revenue, either directly or indirectly. It is this search for a fast income that increases developmental deficiencies. It seems that a decrease in oil prices is not the only concern, since the rise in population in Saudi Arabia (it will reach 30million within 5years) will play a contributory part in reducing the per capita income.
In this day and age, controlled, slow spending is being replaced with high stocks; a fact that is concerning officials. Nonetheless, at this time, following economic successes and the victories in the fight against terror, the focus needs to be redirected to comprehensive qualitative enhancement of individuals, the market and the government.