Saudi king admits 'painful' but necessary economic reforms

King Salman admitted on Wednesday that Saudi Arabia was enduring "painful" economic reforms but said they were necessary to “protect the country from worse problems”.

The steep drop in oil prices since mid-2014 has pushed energy-rich Gulf Arab states to rein in lavish public spending. Saudi Arabia racked up a record budget deficit of nearly $100bn last year, forcing it to find new savings and ways to raise money.

"The state has sought to deal with these changes... through a variety of measures to restructure the economy, some of which may be painful in the short run but ultimately aim to protect the economy of your country from worse problems," Salman told the consultative shura council.

"Similar circumstances have happened before over the past three decades, forcing the state to cut its expenses, but it emerged from them, thanks be to God, with a strong economy and continuous and increasing growth," he added.

In a drastic step to save money, the king slashed the salaries of ministers and Shura Council members by 20 and 15 percent in September, and scaled back financial perks for public sector employees.

In October, Saudi Arabia sacked its veteran finance minister, as it went major economic restructuring. Back in May, the long-serving oil minister was also replaced, as part of the major government overhaul.

Salman also said that Saudi Arabia sees the security of neighbouring Yemen as part of the kingdom's own security, and issued a thinly veiled warning to regional rival Iran not to meddle there.

"We will not accept any interference in its internal affairs or anything that affects its legitimacy (government), or will make it a hub or a passage for any state or party to target the security of the kingdom and the region as a whole," he said, without mentioning Iran by name.

In 2015, Saudi Arabia led a military offensive, alongside many Gulf and Arab countries to reinstate Yemeni President Abd-Rabbu Mansour Hadi, to power after Houthi rebels forced him to flee abroad.

Sunni Saudi Arabia accuses Iran of trying to expand its Shia influence into Arab countries such as Syria and Yemen, a charge strongly denied by Tehran.

Salman also said that Saudi Arabia would continue to work with world powers to achieve world peace.

He made no direct reference to Syria, where government forces finally broke rebel resistance this week in the city of Aleppo, marking a major victory for President Bashar al-Assad in the civil war.