Saudi Arabia in CRISIS: Kingdom reveals £66billion deficit amid falling oil prices

Revenue from oil sales in 2015 will be 444.5 billion riyals down by 23 percent from 2014, according to the finance ministry statement.

The country reported that its budget deficit – the amount in which expenditures exceed revenue – for 2015 hit $98 billion (£65.7 billion).

Private analysts said markets could react positively to Monday’s budget announcement because the 2015 deficit was lower than the 400-450 billion riyals which many investors had feared.

Jadwa also noted that the oil price used to calculate Saudi Arabia’s oil income in 2016 will be set at Dollars 40.3 a barrel, down from USD 64.8 a barrel this year.

Public revenues are the lowest since 2009 when oil prices dived as a result of the global financial crisis.

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

The UK, long the preferred home of Saudi royal property investment, has seen a spate of sales over the past few years as the falling price oil has brought the days of the high-spending Middle Eastern spending to an end. “Saudi Arabia more than anyone else has the capacity to wait out the market until this balancing takes place”.

Saudi Arabia, the de facto leader of the 12-member Opec oil cartel, has led the move to drown the world with excess supply, in an attempt to undercut higher-cost rivals such as U.S. shale oil producers. The kingdom reduced energy subsidies and intends to cut spending in 2016 to 840 billion riyals ($224 billion) from 975 billion riyals this year.

Prices will also rise for other fuels including natural gas, diesel and kerosene and for heavily subsidised electricity and water, but details were not immediately available. The price of oil has slumped by more than two thirds from a peak 18 months ago of $115.

Saudi Arabia’s oil minister said on Wednesday his country won’t change policy and will continue with the current output level that has kept prices at historic lows.

It comes after the International Monetary Fund warned in October that Riyadh would run out of money within five years if it did not tighten its belt.

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