Saudis Crushed by Cheap Oil

The ministry expects to generate roughly $137 billion next year, a 15 percent decrease from the $162 billion earned in 2015.

Mr Naimi said Saudi consumers – who have been used to record low prices at the pumps – will now be forced to use fuel more “efficiently” in the face of subsidy cuts. The budget for the next fiscal year is adopted in the light of very low oil prices, the ministry said, adding that, “this budget also comes amid challenging worldwide and regional economic and financial conditions, namely a global economic slowdown in growth”. Meanwhile, non-oil revenues rose 29 percent to $43.6 billion.

Long accustomed to cheap utilities and some of the lowest petrol prices in the world, Saudis woke to a shock Tuesday as authorities made massive subsidy cuts after falling oil prices caused a record deficit.

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.

Minutes later, state news agency SPA said the government had raised domestic fuel, water and electricity prices. Riyadh was the driving force behind OPEC’s shift in policy past year, rejecting calls to reduce output to support oil prices that are trading this month at their lowest since 2004. By the end of the current fiscal year 2015, public debt is estimated at SR 142, equivalent to 5.8 per cent of the expected GDP this year, as compared to the public debt registered at the end of the last fiscal year (2014) of SR 44 billion, which represented two per cent of GDP for the year (2014).

The country now provides subsidies for energy usage amongst citizens of the country, but next year, citizens will be required to pay for more services and energy costs then they typically do. But now, analysts are considering whether Saudi Arabia could decide to abandon its currency peg against the dollar.

The price of higher-grade unleaded petrol will rise to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50 percent.

Oil Minister Ali al-Naimi told reporters at an event in Riyadh Wednesday that the world’s top oil exporter won’t change its “reliable” energy policy despite pressure on finances.

Saudi Arabia also said it spent more than expected on social security benefits and salaries for government workers and military members.

Jadwa Investment forecast the Saudi economy would grow by just 1.9 per cent next year, down from 3.3 per cent this year and 3.5 per cent in 2014.