Saudi Arabia posts $98B deficit amid low oil prices

In 2015, Saudi Arabia’s budget deficit soared to $98 billion, a larger than expected move higher.

The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil.

Saudi Arabia’s 2016 budget is allegedly based on an average crude price of about $29 per barrel, Bloomberg reports, quoting Riyadh-based Jadwa Investment.

“Budget execution will now be paramount”, said Mr Saliba.

The government said it plans to spend 840 billion riyals in 2016, down from the 975 billion riyals it expects to spend this year.

The Saudi government unleashed plans this week for a $48.7 billion stimulus package to support projects designated as national priorities, saying support was needed because of “excessive” volatility in crude oil prices.

The decisions will save the government about 16 billion riyals a year, Al Eqtisadiah newspaper reported, citing its own analysis. Revenue is forecast to decline to 514 billion riyals from 608 billion riyals. Total revenue was estimated at $162 billion, and that income for 2015 was 15% lower than projected.

Oil prices have fallen by more than half ever since that November 2014 decision, with Brent crude, the global benchmark, trading at about $37 a barrel on Wednesday in London, its lowest level since the 2008-09 financial crisis.

People in Saudi Arabia came out on social media to express their views on the budget and subsidy cuts.

Saudi Arabia will continue to pump record amounts of oil in the face of decade-low energy prices, the kingdom’s oil minister has said.

Oversupply, despite low crude prices, and weak demand are putting downward pressure on markets.

The latest budget announcements show Saudi Arabia can not afford to suffer forever.

However, the increase wasn’t surprising to analysts, who said officials have been hinting at this possibility for months.

“We no longer limit production”, he was quoted by The Wall Street Journal as saying.

Lower energy prices are weighing on revenues. “There was no strain on banking and there was no strain on liquidity”.

The kingdom has seen a sharp drop in revenues as oil prices have fallen by more than 60 percent since mid-2014 to below $40 a barrel.

Tumbling prices forced the Saudis to unveil a bold programme of spending and subsidy cuts in their 2016 budget, as the country’s monarchy seeks to consolidate its public finances.