Saudi Arabia’s latest economic plan comes with a big risk: while it might help boost investment, it could also hit the government’s finances.
Crown Prince Mohammed bin Salman wants the kingdom’s biggest companies -- including oil giant Saudi Aramco and chemical maker Sabic -- to reduce their dividends, most of which are paid to the state, and spend the money locally.
The idea is that their expenditure on new infrastructure and technology will be big enough to accelerate the country’s growth and cause a jobs boom.
The de facto leader’s strategy amounts to a “sacrificing of current profits for future investments,” Karen Young, resident scholar at the American Enterprise Institute in Washington, said in an opinion piece. “There is a generational shift: a moment to build and create a post-oil era, but in the short-term, the government will be exhausting its resources.”
Here’s a look at the likely impact on the budget and the economy, which was hit hard last year by the coronavirus pandemic and crash in oil prices.
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