Kemp: Saudi Reform Efforts Wax and Wane with Oil Revenues
Saudi Arabia's current reformist leader is younger and has more access to professional help from Western experts on change management than the already ageing leaders in the late 1990s.
But the reserves will last only so long and are already pledged to defend the riyal's fixed exchange rate against the U.S. dollar and maintain current expenditure to avert a deep and destabilising recession.
In other respects, the challenges remain the same or have become harder. The population is still growing rapidly and more Saudis are reaching working age ("World Development Indicators", World Bank, 2015).
Efforts to diversify the economy have failed over the last 20 years. Dependence on oil export revenues actually increased during the oil boom, according to the United Nations Conference on Trade and Development.
Oil exports accounted for 87 percent of all merchandise export earnings in 2012/13 and 46 percent of gross domestic product ("The state of commodity dependence", UNCTAD, 2015).
Given how much of the rest of the economy is dependent on patronage and providing goods and services to the oil sector, the true state of oil dependence is even higher than the official figures suggest.
No one should underestimate the determination of Saudi Arabia's new rulers to overhaul the kingdom's economy, but the immense challenges should not be underestimated either.
(Editing by Dale Hudson)
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