Saudi Arabia passes 2016 budget with $86 bln deficit

The deficit is “considered an acceptable figure” under the circumstances, with oil languishing at multi-year lows, Hindi bin Abdullah al-Suhaimi, an advisor to the council, told a media briefing.

The original budget plan for 2015 projected spending of 860 billion riyals.

Saudi Arabia, the world’s biggest crude exporter, continues to cut its dependence on oil revenue due to the slump in oil prices, even as the kingdom keeps boosting production to defend its market share. The report shows a staggaring fiscal deficit of 367 Saudi riyals (SR) for FY 2015 (about $98 billion or 89 billion euros) – almost 38 percent of the government’s total expenditures.

Saudi Arabia’s public revenues for 2015 have been the lowest since 2009, when oil prices took a nosedive as a result of the global financial crisis.

Saudi Arabia’s ministers of economy and planning, finance, and water and electricity are likely to be accompanied by a senior official from state oil giant, Aramco.

The government announced its budget on Monday, projecting spending of $224 billion (840 billion riyals) in 2016 versus $137 billion (513 billion riyals) in revenue. Oil normally contributes the vast majority of public income.

A more comprehensive, multiyear plan that will focus on generating non-oil income and include other economic and social reforms, such as restructuring generous subsidies, is expected to be presented in early 2016.

In a bid to cut costs, Riyadh announced last month it was setting up an office to oversee government spending as it draws down its foreign reserves, sells bonds for the first time in over a decade and delays projects.

The kingdom has also seen a sharp fall in its revenues as oil prices have plummeted by more than 60 percent since mid-2014 to below $40 a barrel now.

The statement says the ministry will review current levels of fees and fines, introduce new fees, and complete “the necessary arrangements for the application of the value added tax (VAT)…in addition to… additional fees on harmful goods such as tobacco, soft drinks and the like”.