Will Oil Slump Cause Saudi Arabia to Abandon its Dollar Peg?

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.

Saudi economic growth is set to slow further in 2016 after the OPEC heavyweight announced record deficits due to a slump in oil prices, an economic report said Wednesday.

Brent, the benchmark for more than half the world’s oil, is poised to end 2015 with the lowest annual average price in 11 years, hurting energy- exporting countries and companies.

Oil revenue was expected to reach $119 billion in 2015, or 73 per cent of the kingdom’s total revenue.

Mr Naimi’s pledge came just days after Saudi Arabia posted its biggest ever budget deficit of £66bn on the back of collapsing state revenues.

But this year’s deficit ballooned to 367bn Saudi riyals ($97.9bn, ) or 15 per cent of gross domestic product, as oil revenues fell 23 per cent to Sr444.5bn. The media outlet OilPrice.com and various others, including Business Insider, have pointed out that the lower the price goes, the less oil those rival countries can produce.

In a speech, Saudi Arabia’s King Salman bin Abdulaziz Al Saud, said: “Our economy has the potential to meet challenges”.

The change comes amid a raft of measures to combat the kingdom’s record budget deficit of $98 billion in 2015.

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 kingdom will also make cuts to utility subsidies such as electricity and water, a move that will anger many Saudis.

Aramco, the national oil conglomerate said on twitter that all petrol stations will close with immediate effect on Monday till midnight, and will resume with new prices.

Spending on military and security projects reached 20bn riyals in 2015, Saudi Arabia said, following its intervention in Yemen as well as action against militant group Islamic State.

The sharp increase was a surprise as the finance ministry said Monday that it would implement a “gradual” five-year program aimed at structural economic reform, including fuel price hikes, to improve energy efficiency.

To finance the budget, the Saudi government withdrew from its huge fiscal reserves and issued bonds on the domestic market.