Saudi Arabia hits record $98B deficit, Riyadh doubles gas prices

Saudi Arabia on Monday unveiled spending cuts in its 2016 budget, subsidy reforms and a call for privatization to rein in a yawning deficit caused by the prolonged period of low oil prices.

The budget also contained spending cuts of 135 billion riyals, a drive to raise revenues from taxes and privatization and promises to make government projects more efficient.

Government spending reached SAR 975bn in 2015, 15 per cent more than expected, further squeezing public finances.

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

“The kingdom reduced its dependency rate on oil revenues in 2015 and it will do the same in 2016 to overcome any negative impact from the decline in oil prices”, Sfakianakis said.

The Finance Ministry said it adopted a budget for next year that takes into account the weak crude oil market. The International Monetary Fund had projected a deficit of $130bn.

This is the first budget under King Salman, who ascended to the throne in January, and for an economic council dominated by his increasingly powerful son, Deputy Crown Prince Mohammed Salman. But now, analysts are considering whether Saudi Arabia could decide to abandon its currency peg against the dollar.

The ministry intends to implement several measures that will change the operational state of the country following the introduction of new leadership and the continued state of the commodity-oil-responsible for generating roughly two-thirds of the country’s annual revenue.

Oil prices slid in response to Monday’s statement, with the U.S. benchmark West Texas Intermediate losing $1.29 to $36.81 a barrel, while Brent crude shed $1.27 to $36.62 a barrel in London.

Saudi Arabia had a chance to limit production of oil on December 4, at a meeting of the Organization of Petroleum Exporting Countries, a cartel of 13 nations (not including the US) that exists to stabilize oil prices. After the announcement of an increase in fuel prices in Saudi Arabia by more that 50 per cent yesterday, petrol stations in the kingdom witnessed a huge traffic and crowds.