Saudi Arabia projects $87B deficit amid low oil prices

Saudi Arabia’s government unveiled its 2016 budget on Monday and expects to record a deficit of 327 billion riyals (approximately $87 billion), according to Al Arabiya.

Saudi Arabia announced its first budget under King Salman, who ascended to the throne in January, amid plans to gradually cut subsidies and sell stakes in government entities to counter the drop in oil revenue.

In this Friday, Dec. 11, 2015 photo, Saudi women shop at a…

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 world’s top oil exporter reduced its dependence on crude by 23 percent in the 2015 fiscal year, the ministry said Monday.

The finance ministry also plans to establish a unit responsible for public debt management, in order to improve the Kingdom’s ability to borrow both domestically and internationally, “thus contributing to the market for sukuk and local bonds”, Monday’s statement said.

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 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.

Crude oil prices are lower in part because weak global economic growth is not enough to take up the extra crude oil on the market.

As is typical for the published version of the budget, it did not include a projected oil price.

The slide in the price of oil is requiring Persian Gulf leaders to restructure their economic and social policies, including painful cuts in energy subsidies and measures to put more citizens to work.

In addition, Riyadh has been under tremendous financial pressure due to its expensive military intervention in its southern neighbor, Yemen, which started in late March in a bid to undermine Yemen’s Ansarullah movement and bring fugitive former Yemeni president, Abd Rabbuh Mansour Hadi, back to power.