Saudi Arabia hits record $98B deficit, Riyadh doubles gas prices

Saudi Arabia also announced plans to shrink the record state budget deficit with spending cuts and a drive to raise revenues from sources other than oil.

Earlier this year, the International Monetary Fund released a report detailing the impace of low oil prices on the world’s largest crude oil producers.

But Saudi Arabia is paying the price for its high-production stance and sees a $98 billion budget deficit for 2015 and another $86.86 billion hole in 2016. That’s forced Saudi Arabia to tap its foreign reserves, which dropped for a 10th straight month in November to a three-year low, and to sell bonds for the first time since 2007 in to help plug a budget gap.

Revenues in 2015 dropped to United States dollars 162 billion, the lowest since the global financial crisis in 2009, due to a massive USD 123 billion fall in oil revenues.

The kingdom’s revenue from oil sales will make up about 70 percent of the budget next year, John Sfakianakis, a Riyadh- based economist and a former adviser to the government, said by phone.

The ministry said oil income made up just 73 per cent of total revenues in 2015, way below its contribution in previous years.

The majority of the increase in overall spending was on salaries to civil and military Saudi employees.

The leading member of Organisation of Petroleum Producing Countries (OPEC) has maintained high output despite requests from some members such as Venezuela to cut production to fix the prices.

Energy, water and electricity prices will be “gradually” lifted over the next five years, with the aim of minimising the negative effects on “low and mid-income citizens and the competitiveness of the business sector”.

As a results, cuts are coming: The budget calls for a 14% reduction to 840 billion riyals ($224 billion), down from 975 billion ($260 billion).

The revisions include raising the price of 91 octane gasoline to 0.75 riyals a litre from 0.45 riyals and increasing the price of 95 octane gasoline to 0.90 riyals from 0.60 riyals.

The ministry also said nominal gross domestic product for 2015 is estimated to drop 13.35 percent to $653 billion.