High-grade gasoline will increase by 50 percent to 0.90 riyals ($0.24) a liter, and lower-grade gasoline will see a 67 percent increase.
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Saudi Arabia is trying to maintain its share of the global oil market rather than use its power in OPEC to curb USA producers.
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The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon, but is instead preparing for years of cheap oil.
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Price hikes have been outlined for utilities such as electricity and water, as the country battles slumping revenues thank to the fall in the price of oil, which has collapsed to around $US36 a barrel in recent trading from more than $US100 a barrel as recently as 18 months ago – declining 50 per cent in the past six months alone.
“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.
Despite those moves, Saudi Arabia said it expects its budget deficit to basically remain the same in 2016.
The IMF has said that if Saudi Arabia raised its fuel prices to Gulf levels, it will save around $17 billion annually.
The Finance Ministry did not disclose the average oil price assumed in its 2016 budget calculations but economists estimated it was about $40 a barrel.
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 finance ministry said it was planning a series of measures to contain spending, including a five-year programme to cut subsidies on electricity and fuel.
The government attributed the majority of the deficit in this year’s budget to the bonus to government employees ordered by King Salman after ascending the throne. When oil prices steeply dropped in 1986, Saudi Arabia ran a budget deficit for some 15 years, significantly increasing public and external debt until oil prices finally recovered in the 2000s.
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It unveiled economic and fiscal reforms to make the budget more sustainable, including a programme to contain spending growth, especially for wages and benefits which accounted for half of the 2015 budget. The International Monetary Fund warned in October that Riyadh would run out of money within five years if it did not tighten its belt. There was also an additional 20 billion riyals spent on defense and security because of the Yemen war, officials said. It now totals 142 billion riyals, or roughly 6% of the country’s gross domestic product. The economy was forecast to grow by 3.35 percent this year.
