Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman has a daunting to-do list as the real work begins on his plan to transform the world’s biggest oil exporter into an economy no longer reliant on crude.
"2017 is a reality check," said John Sfakianakis, who is director of economic research at the Gulf Research Centre in Riyadh and also a weekly columnist for The National. "We’re done with the announcements. Now it’s the teeth that need to show behind the actual plan. The global investor community will be looking at that."
From planning potentially the world’s biggest initial public offering to rolling out taxes and protecting Saudis from the impact of spending cutbacks, here are six developments to watch this year:
1. Shielding the poor
The Citizen’s Account is a programme meant to soften the impact of austerity measures on low- and middle-income Saudis. It will start with 20 billion to 25bn riyals (Dh19.6bn to Dh24.5bn) of disbursements this year, and increase to 60bn to 70bn riyals by 2020.
Registration opened February 1 and more than half of Saudi Arabia’s 20 million citizens have already signed up. With the government planning to begin payments later this year, newspapers and social media have reflected the widespread confusion over eligibility. Should Uber drivers report their side-income? Can ministers sign up? What about professional football players?
The programme goes to the heart of the implied social contract in Saudi Arabia, where the Saud family has traded generous spending on its subjects for absolute loyalty for more than eight decades.
"You have to assume that there will be mistakes," said Crispin Hawes, London-based managing director at Teneo Intelligence. "You just have to make sure they’re not so egregious that they dilute the process of political authority."
Saudi Arabia reviewed other countries’ experiences and developed plans "aimed at hedging against possible errors", a senior source in the Council of Economic and Development Affairs said in a written statement to Bloomberg, adding that the plans are based on conservative numbers to ensure adequate coverage.
"In case we detected that the programme did not cover an entitled category, we will adjust it and pay them retroactively to achieve justice in coverage and support," the source said in the statement.
2. Taxes
The government is also planning new taxes as it seeks to balance the budget. In April, it is to impose an excise tax on "harmful products", doubling the price of tobacco and energy drinks and putting a 50 per cent levy on soda.
The new levies are a prelude to the planned GCC-wide 5 per cent value added tax in 2018, which will have an even broader effect on the cost of living for Saudi residents. Riyadh-based Jadwa Investment expects inflation to rise towards the end of this year, as Saudis front-load purchases ahead of the new tax.
3. Subsidy cuts
The government began a multiyear programme of gradual reductions to fuel, water and electricity subsidies with a surprise announcement in late 2015, sending Saudis rushing to petrol stations to fill up.
The energy minister, Khalid Al Falih, said in December the next round of cuts will happen before the end of 2017. "The intent is to do it soon enough," he said.
4. Fees on expats
From July, the government will charge an unprecedented monthly fee for foreign workers with dependents in the kingdom. The levy will increase each year until it reaches 400 riyals per month per dependent by 2020
While potentially popular among locals – slogans like "Saudi is for Saudis" are spreading on social media as the economy slows – private sector reaction may be more challenging for the government. Large Saudi-owned businesses including the construction conglomerate Saudi Binladin "are massively dependent on low-cost foreign labour", Mr Hawes said.

Source: The National