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HOUSE_OVERSIGHT_016131

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our view. This would thus imply that fiscal consolidation is likely to fall short of narrowing imbalances materially without a sustained oil price recovery. The fees on excess foreign worker quotas and the green-card like program targeted proceeds are difficult to reach, in our view. We calculate that to raise US$10bn from a green-card like program, authorities will need to set the program fees at US$1,500 (in line with upper bound of similar programs elsewhere) and have all expatriate workers applying to enrol in the program. This appears an unrealistic target to meet, particularly as it is not clear how these proceeds would be recurrent yearly. As for the foreign worker quotas proceeds, we calculate that, based on private sector expatriate figures and the stated 85% overall compliance with Nitaqat sector quotas, that the fees would need to be set at a large cUSS10,500 per non-compliant worker to be consistent with the NTP target. The large fee amount would likely be a material disincentive to private sector corporates and a squeeze on their profits. One of the obstacles to meeting the subsidy reform target is likely to be political in nature given the impact on inflation and household incomes. We calculate nevertheless that the target could be reached through a combination of a administered prices changes. We do not think there is major room to increase natural gas feedstock prices to petrochemical firms, given the NTP focus on the petrochemical sector as a source of future growth. We estimate raising natural gas prices to US spot levels in an oil price environment of US$50/bbl would bring in revenues to the central government of just US$2.5bn (0.4% of GDP) if fully passed to the budget. This is likely to suggest that the bulk of the future adjustments are likely to center on hikes to administered price adjustments for domestic crude oil sales, diesel and gasoline. Selling domestic crude at US$25/bbl rather than an average of US$5.4/bbl would bring in US$20.8bn in

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