Saudi Arabia Faces Record Budget Shortfall On Lower Oil Prices

Talking to broadcaster CNBC Arabia, he said the country was in a good position to manage low oil prices.

Saudi Arabia has been burning through its currency reserves to plug the gap between spending and revenues since the oil price collapsed late previous year.

“There are some projects like the ones that have been approved a few years ago and haven’t been carried out until now – that means such projects are not currently necessary and can be delayed,” said US-educated Al-Assaf, who has previously worked for the International Monetary Fund.

The minister declined to provide more details on the scale of the spending cuts, but insisted that key cuts would come about in education and health sectors without affecting the country’s infrastructure.

The oil price fell to $42 per barrel last month, down from about $110 per barrel in mid- 2014.

However Al-Assaf said the country is likely to issue bonds, for the first time in the best part of a decade, as well as raising money on the worldwide markets for specific large projects.

Not all projects would be cut at the same pace, Mr Alassaf said. The budget crisis only worsened when Saudi Arabia started an expensive military campaign in Yemen.

Based on the IMF’s forecast in July, the budget deficit can be as high as 20 percent of Saudi Arabia’s gross domestic product (GDP). Jadwa said that by the end of July the government had withdrawn $82 billion from its reserves, reducing the assets to $650 billion.

The reserves are anticipated to drop to $629 billion by the top of the yr, Jadwa stated. It is forecasting 2.4 percent growth for next year.

Citing official figures, Jadwa stated final week that the Saudi financial system grew three.8pc within the second quarter, up from 2.4pc within the earlier interval, as a effect of an increase in oil manufacturing.

However, in recent years the development of shale gas, particularly in the U.S., as well as oil production in the North Seas, has threatened Saudi Arabia’s dominance as energy exporter.

The finances shortfall is hitting as Saudi Arabia maintains a.

Unleaded petrol costs only about 15 USA cents per litre in Saudi Arabia, the world’s lowest price after Venezuela, according to website mytravelcost.com. The reform could also help hold back burgeoning consumption. The government is building public transport systems but the Riyadh metro is only due to be completed in 2019, for example.