Subsidies ‘distort’ Saudi Arabia economy says economy minister

from the Financial Times..

May 7, 2013, By Michael Peel in Riyadh

Consumer subsidies are “distorting” Saudi Arabia’s economy, a top finance official said on Tuesday, in a stark sign of how state largesse is undermining the ambitions of the Gulf’s most populous state to diversify beyond oil.

Mohammed al-Jasser, economy and planning minister, said the government was trying to save some of the tens of billions of dollars spent annually on holding down the price of fuel and other basic goods and services.

His remarks underscore a Gulf-wide problem felt most acutely in Saudi Arabia, which is notoriously wasteful of energy and is seeing its subsidy bills rise in step with brisk population growth.


Energy subsidies amounted to about one-fifth of Saudi Arabia’s gross domestic product in 2011, according to the International Monetary Fund, while the countries of the Middle East and North Africa together accounted for about half of the $480bn spent on energy subsidies by governments globally. Saudi Arabia and its Gulf neighbours have historically had some of most profligate energy use and deepest carbon footprints on the planet, with the kingdom burning more than 750,000 barrels a day of crude oil to meet peak energy demand last summer…

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