Saudi Arabia’s central bank directed local lenders to reschedule the consumer loans of clients affected by last week’s decision to scrap the bonuses and allowances of many state employees.
The Saudi Arabian Monetary Agency, as the central bank is known, said in a statement on its website on Sunday that the step was part of efforts to “reduce pressure on borrowers” whose income was cut by the government’s September 26 package of measures to further trim spending.
The agency said local banks must obtain the client’s approval before rescheduling a loan. Borrowers should present proof that their income has been affected by the recent cuts to the nearest bank branch, the regulator said. Loans taken after the cabinet decision to end the payments won’t be rescheduled.
Under Deputy Crown Prince Mohammed bin Salman, the world’s biggest oil exporter has already delayed payments owed to contractors and started cutting fuel subsidies as it tries to manage lower oil prices. The measures may help narrow the budget deficit to 13 per cent of gross domestic product this year and below 10 per cent in 2017, according to International Monetary Fund estimates.
The cancellation of bonuses and allowances – and a simultaneous decision to lower ministers’ salaries by 20 per cent – further spread the burden of shoring up public finances to a population accustomed to years of government largesse. Yet analysts have warned the cuts risk deepening the kingdom’s economic slowdown by damaging consumer confidence.
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