Saudi Arabia cuts dependence on oil

Revenues were estimated at $162bn – well below projections and 2014 income, while spending came in at $260bn, finance ministry officials announced at a press conference in the capital, Riyadh. However, the government has also put aside $49 billion (183 billion riyals) in discretionary spending to use on infrastructure projects if oil prices improve.

Saudi Arabia’s budget has been under pressure as oil, the nation’s main source of revenue, trades near the lowest level in 11 years and the kingdom conducts a money-draining war in Yemen.

Oil prices have fallen by almost a third in 2015, and the global glut in crude is expected to continue if Saudi Arabia does not curb its output.

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

“The result of the programme will be to increase energy efficiency, national economy and create many jobs”, he said.

Despite projecting it would spend $229.3 billion (860 billion riyals) in 2015, the kingdom actually spent $260 billion (975 billion riyals), in large part because of handouts King Salman doled out to the public when he ascended the throne earlier this year.

Humbled by the slumping oil price, Saudi Arabia, long the world’s major oil producer, has been forced to take an axe to government spending by slashing a host of subsidies – including the price of oil.

Revenues next year are forecast at 514 billion riyals, down from revenues of 608 billion riyals in 2015.

The de facto leader of the world’s 12-member oil cartel, Opec, Saudi Arabia has led the move to drown the world with excess supply in a bid to undercut higher cost rivals such as U.S. shale.

Saudi Arabia’s 2016 budget is allegedly based on an average crude price of about $29 per barrel, Bloomberg reports, quoting Riyadh-based Jadwa Investment. Such subsidies are a highly sensitive issue in Saudi Arabia, where residents have grown accustomed to low utility and fuel costs.

Prices on fuel products were raised by up to 80 per cent as of midnight, including a 50 per cent jump in the price of the most commonly sold petrol to 0.90 riyals (US$0.24) per litre.

And the ministry also said it would review government projects to make them more efficient and ensure they were necessary and affordable, on top of other reforms including “privatising a range of sectors and economic activities”.