Saudi Arabia in CRISIS: Kingdom reveals £66billion deficit amid falling oil prices

The Kingdom of Saudi Arabia’s Ministry of Finance has outlined the country’s 2016 budget plans, revealing a plan to reduce spending next year due to low oil prices.

Revenues were estimated at 608 billion riyals ($162 billion), well below projections and 2014 income, while spending came in at 975 billion riyals ($260 billion), ministry officials announced at a press conference in Riyadh.

The Saudi government unleashed plans this week for a $48.7 billion stimulus package to support projects designated as national priorities, saying support was needed because of “excessive” volatility in crude oil prices.

Saudi Arabia on Monday unveiled a SR840 billion budget, launching a phase in which the Kingdom hopes to further diversify its revenues in an era of low oil prices.

King Salman said the budget came “in light of the decrease in oil prices, the economic and regional and worldwide financial challenges – where global economic growth has declined from its previous level – and the lack of stability in some of the neighbouring states”.

In the 2015 budget, oil revenues accounted for 72 per cent of total revenue as opposed to 87 per cent in 2014.

It said that investment spending in next year’s budget was cut by 19.3 per cent to United States dollars 59 billion.

The council chose to raise the price of higher-grade unleaded petrol to 0.90 riyals ($0.33) per litre from 0.60 riyals ($.022), a hike of 50 per cent, and for lower-grade petrol to 0.75 riyals ($0.28) from 0.45 riyals ($0.37) per litre, a 67 per cent rise.

Saudi Arabia is the largest member of the Organisation of Petroleum Exporting Countries, which earlier this month failed to agree any output cuts despite oil prices dropping to near 11-year lows.

The authorities announced increases in the prices of fuel, electricity and water as part of a plan to restructure subsidies within five years. As is typical for the published version of the budget, it did not include a projected oil price.

In a speech to cabinet on Monday, King Salman – overseeing his first budget since taking over the country in January – emphasised the need for diversification. Meanwhile, non-oil revenues rose 29 per cent to $43.6 billion.

The kingdom withdrew more than US$80 billion (RM343.4 billion) this year from the reserves, which stood at US$732 billion at the end of 2014, and issued bonds worth around US$20 billion.