The recent move by the International Monetary Fund to downgrade growth prospects for the Saudi economy is not a cause of concern. On the one hand, the change reflects reduction in public sector spending with all the adverse effects on economic activities. On the other, the fall in spending confirms governmental determination to streamline expenditures in the environment of low-oil prices.

For 2017, the IMF expects the Saudi economy to grow by a mere 0.4 per cent, down from the original forecast of 2 per cent. The change partly relates yo cuts in oil production. Much to its credit, the kingdom has shouldered the responsibility within Opec, by cutting oil production in a bid to bolster oil prices.

Yet, not all Opec members have demonstrated the same willingness to check production following the agreement reached late last year. Oil prices have been hovering around $50 per barrel, certainly nowhere close to the levels predating the plunge in mid-2014. This is no good news for the kingdom, hence the need to curtail spending and enhancing income where possible.

Saudi Arabia’s budget for fiscal year 2017 calls for expenditures and revenues of $238 billion (Dh873.46 billion) and $185 billion, respectively. This leaves behind a projected deficit of $53 billion.

Remarkably, total revenues are up by 31 per cent versus the level achieved in 2016, of $141 billion. Among others, the development concerns stronger prices or lower subsidies for governmental goods like utility, higher fees for governmental services, and stiffer financial penalty for practices like speeding.

With regards to expenses, measures include reducing salaries for ministers and ministries and doing away with some projects. By one account, PricewaterhouseCoopers is reviewing $69 billion worth of contracts with the aim of cutting a third of them. The intention is to review projects awarded by the housing, transport, health and education ministries.

Undoubtedly, a drop in spending undermines growth. Not surprisingly, many private sector investors depend on public-sector spending for the well-being of their businesses.

Still, the private sector is expected to provide many job opportunities for locals even during these challenging times. It is assumed that governmental entities could no longer provide most of the new jobs given the economic circumstances.

The unemployment rate among locals stands at around 12 per cent. However, the actual jobless rate is believed to be lower, as some Saudi nationals earn money during the annual Haj as well as Umra. In the absence of a comprehensive tax regime, not all activities and generated revenues are recorded properly.

Looking forward, the kingdom is not expected to face difficulties raising fresh funds in the international market. In October, Saudi Arabia raised $17.5 billion of Eurobonds in capital markets, the biggest issuance for an emerging-market. It is suggested the package was oversubscribed by several times, with total bids amounting to $67 billion.

The authorities are expected to seek around $15 billion in Eurobonds this year to bridge the financial shortage. No hurdles are envisaged.

Happily, the painstaking efforts for restructuring and rationalising spending and revenue sources are paying off. Actual deficit in fiscal year 2016 stood at $79 billion, down from the assumed $87 billion, on the back of stronger revenues.

The shortage in 2015, the first full year following fall of oil prices, stood at a record $98 billion. The planned deficit for 2017 amounts to $53 billion but could end up being lower in the light of sustained determination to cut spending and raise income.

The writer is a Member of Parliament in Bahrain.