Saudi Posts Record Deficit Amid Oil Slump

The finance ministry said in a statement that revenues in 2015 were estimated at 608 billion riyals ($162 billion), the lowest since 2009 when oil prices dived as a result of the global financial crisis.

Despite those moves, Saudi Arabia said it expects its budget deficit to basically remain the same in 2016.

Revenues next year are forecast at SR514 billion, down from SR608 billion in 2015, when oil revenues accounted for 73 percent of the total. Falling by over 60%, a barrel of crude now sells for less than $50, and those figures have had a drastic impact on the Saudi Arabian economy, which relies on oil for roughly 90% of its revenue.

Saudi Arabia said Wednesday that it would continue to “satisfy” additional demand for oil even as crude futures fell on data showing USA stockpiles growing. In an effort to put competing oil producers out of business – as well as USA shale-oil extraction companies – Saudi Arabia and other OPEC nations have increased production.

The kingdom announced on Monday that it was raising domestic fuel, power and water prices, according to the official Saudi Press Agency.

The IMF has said that if Saudi Arabia raised its fuel prices to Gulf levels, it will save around $17 billion annually.

The Saudis plan to shrink the deficit to 326 billion riyals by slashing subsidies for petrol, electricity, water, diesel and kerosene, the budget papers revealed.

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.

The decisions will save the government about 16 billion riyals a year, Al Eqtisadiah newspaper reported, citing its own analysis.

The 2016 budget projects revenues at $137 billion, the lowest in six years, and spending at $224 billion, slightly below 2015 projections of $229 billion.

Economy Minister Adel Fakeih said yesterday that 20 billion riyals of this year’s spending overshoot was due to increased military and security spending related to the military operation against Shiite Houthi rebels in Yemen.

Also to make up for the budget deficit, the Saudi government has already started withdrawing from its huge fiscal reserves while issuing bonds on the domestic market.