Amidst the crash in global oil price, Saudi Arabia is trying its best to ensure it does not get caught in oil calamity ever again.
The country is looking at making oil extremely insignificant in its economy. To get this done, Saudi Arabia has a plan. The Sunni nation has just drafted its 2030 plan. A strategy aimed ensuring that its economy is stable for the long term through aggressive diversification.
As opposed to the resistance from Nigeria’s conservative society and the persistent pussyfooting of its leadership, Saudi Arabia is taking tough choices. The country is doing away with its old way of running its economy. For a country with ultra-conservative Sunni Islamic values, Saudi is the haven for various subsidies.
In summary, the plan is summarised as:
It very glaring to Saudi’s policy makers that for the country to achieve its 2030 plan that will wean it from an over-dependence on oil, many subsidies on food, gas and welfare have to either get cut or reduced and redirected to save cost.
While not kidding with the plan, Saudi Arabia will also be borrowing about 200 billion through treasury bills and sovereign debts to be able to direct such borrowing in diversifying its energy and power needs into alternative and renewable sources, upgrade critical infrastructure that can bring in private investment. The country’s debt to GDP ratio will then shoot up to 30%.
To further raise funds and spread its risk exposure to its Aramco Oil, Saudi Arabia plans to float 5% of the shareholding of the company in the market. This is expected to bring some cash and allow private participation in the company. Nigeria has rumoured this plan but it is very much unlikely that such plan will happen any time soon.
Where is Nigeria’s plan to get itself out of the oil trap?