Saudi Arabia posts record high $98bn budget deficit in 2015

The government of Saudi Arabia has posted a record high budget deficit of $98 billion in 2015 as plummeting oil prices take their toll on kingdom’s revenues.

The announcement was made by the country’s Finance Ministry officials at a rare press conference in Saudi Arabia’s capital city, Riyadh, on Monday.

According to officials, the kingdom’s revenues for the year were estimated at 608 billion riyals ($162 billion), which was far below earlier projections and income figure for 2014, while spending figure was announced at 975 billion riyals ($260 billion).

The budget deficit has been the highest in the history of Saudi Arabia, which is currently the world's largest oil exporter, but fell short of earlier projections, AFP reported.

Before official announcement by Saudi Finance Ministry, the International Monetary Fund (IMF) had projected Riyadh’s budget shortfall for 2015 deficit to stand at around $130 billion, while other reports forecast a deficit of above $100 billion.

This is the second year in a row that Saudi Arabia experiences a budget deficit and Riyadh is expected to announce another budgetary shortfall when it unveils its 2016 budget later on Monday.

The kingdom has also seen a sharp fall in its revenues as oil prices have plummeted by more than 60 percent since mid-2014 to below $40 a barrel now.

Saudi Arabia’s public revenues for 2015 have been the lowest since 2009, when oil prices took a nosedive as a result of the global financial crisis.

The country’s income for 2015 was 15 percent lower than projections and 42 percent less than in 2014.

Riyadh cuts subsidies as budget crunch continues into 2016

Meanwhile, a statement posted on Saudi Finance Ministry’s website on Tuesday said the country will be in for a budget deficit of $87 billion next year, which will be its third annual shortfall in a row.

Riyadh is also projecting spending next year at 840 billion riyals ($224 billion), the statement added.

Budgetary pressure is forcing Saudi Arabia to review the prices of heavily-subsidized electricity and fuel in the country in what has been seen as part of Riyadh’s new measures to cope with low oil prices.

According to the Finance Ministry, plans will be put in gear to increase charges on public services and apply value-added tax (VAT) in cooperation with other Persian Gulf Arab nations.

Saudi Arabia’s official Saudi Press Agency on Monday reported that Riyadh has decided to raise gasoline prices by more than 50 percent for some products from Tuesday as it cuts a range of subsidies.

Prices will also increase for electricity, water, diesel and kerosene under the cuts approved by the council of ministers, which is headed by Saudi Arabia’s King Salman.

Riyadh oil policy to blame for budget shortfall

Saudi Finance Minister Ibrahim al-Assaf had announced in early September that the kingdom was planning to slash government spending and issue more bonds as it faced record budget deficit because of plummeting oil prices.

"We are working... to cut unnecessary expenditure," Assaf added, noting that the kingdom has so far relied on its huge fiscal reserves to bridge the budget gap but more measures should be taken.

Last year, Saudi Arabia posted a budget deficit of $17.5 billion with Jadwa Investment firm announcing that by the end of July the government had withdrawn $82 billion of its fiscal reserves, reducing the assets to $650 billion. Jadwa added that the reserves are expected to drop to $629 billion by the end of the current year.

Saudi Arabia has been widely blamed for the plummeting oil prices as Riyadh has adamantly refused to cut its crude output in a bid to drive other oil market players, including US shale producers, out of the market.

In addition, Riyadh has been under tremendous financial pressure due to its expensive military intervention in its southern neighbor, Yemen, which started in late March in a bid to undermine Yemen’s Ansarullah movement and bring fugitive former Yemeni president, Abd Rabbuh Mansour Hadi, back to power.

More than 7,500 people have been killed and over 14,000 others injured since March 26. The strikes have also taken a heavy toll on the impoverished country’s facilities and infrastructure, destroying many hospitals, schools, and factories.

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