Saudi agrees sweeping economic reforms to move away from oil profits

PanARMENIAN.Net - The Saudi cabinet has approved sweeping economic reforms aimed at moving the country away from its dependence on oil profits, BBC News reports.

Just over 70% of revenues came from oil last year but it has been hit by falling prices.

One part of the plan will see shares sold in state-owned oil giant Aramco to create a sovereign wealth fund.

Announcing the reforms, Deputy Crown Prince Mohammed bin Salman described his country as being addicted to oil.

Even just selling 1% of Aramco would create the biggest initial public offering in history, the prince said, outstripping blockbuster sales like Facebook and Alibaba.

The IMF called the Saudi plan an "ambitious, far-reaching effort" but warned implementation would be a challenge.

Oil has made Saudi Arabia a major economic force. But it comes at a cost. The short-term problem is the volatile price of crude oil, which is now less than half what it was in mid-2014. Saudi Arabia has deep pockets.

It will not go running to the International Monetary Fund for financial help, something another oil exporter, Angola, has done. But the Saudi reserves are eroding and with almost three quarters of government revenue coming from oil, the price fall is making itself felt.

For the long term, international efforts to combat climate change create huge uncertainty about demand for oil in the future. Oil will not lose its dominance of the market for transport fuel in the next few years, but further ahead the outlook is unknown, BBC News said.