Continuing to pump more oil while prices show no signs of stopping their slide has led the Kingdom of Saudi Arabia to a budget deficit of $97.9 billion in 2015 and a planned reduction of more than $13 billion in 2016 spending.
The country’s revenue forecast for 2016 is around $137 billion, down from $162 billion in 2015. Spending in 2016 is now forecast at $224 billion, down from $260 billion this year.
In September we noted that Saudi Arabia may have repatriated up to $73 billion to add to the government’s liquidity and to help pay current bills. The country’s currency, the riyal, is pegged to the dollar and as the dollar has gained strength it has added to the country’s woes caused by low crude oil prices.
According to Reuters, some subsidies will be adjusted:
In its budget statement, the finance ministry said it would adjust subsidies for water, electricity and petroleum products over the next five years. That is a politically sensitive step, since the kingdom has traditionally kept domestic prices at some of the lowest levels in the world as a social welfare measure.
Any changes will aim to make energy use more efficient and conserve natural resources, while minimizing the negative effects on lower- and middle-income Saudis, the ministry said.
The government also outlined other reforms, including privatization in some sectors of the economy, but the finance ministry did not offer any details.
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