Too bad the world’s top oil exporter isn’t saving itself by doing the obvious: Stop dumping oil in a saturated market, admit that chasing market share at the expense of revenue isn’t working – and blame previous management.
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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.
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Tima said the rejection was to blame for Abdullah making the risky boat trip that killed his wife and two young sons. She travelled to Belgium, Germany and Turkey, helping give a voice to those displaced by the war in Syria.
Figures given by Economy and Planning Minister Adel Fakieh indicated the cost of Saudi Arabia’s military intervention in Yemen, which it launched in March and consists mostly of air strikes, was not a major factor in the budget.
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A cut in subsidies risks a backlash in the kingdom as its citizens are accustomed to cheap energy and other utilities.
“I expect that the government will be able to easily raise non-oil revenues above the 200 billion riyal (53 billion) mark next year with the introduction of the new fees”, Abu-Dahesh said. The kingdom usually spends more than it budgets for, as was the case in 2015 when it had planned spending of only 860 billion riyals.
Revenues next year are forecast at 514 billion riyals, down from 608 billion riyals in 2015, when oil revenues accounted for 73 percent of the total.
In the first budget under King Salman, the kingdom said revenues reached 608bn riyals (£108.7bn; $162bn), down 15% on official expectations.
Saudi Arabia is following in the footsteps of the neighbouring United Arab Emirates, which became the first Gulf state to liberalise fuel prices earlier this year.
The revisions include raising the price of 91 octane gasoline to 0.75 riyals a litre from 0.45 riyals and increasing the price of 95 octane gasoline to 0.90 riyals from 0.60 riyals. Construction firms are also expected to be hurt by spending cuts in the budget.
The government said it was planning to cut spending in 2016, with cuts being seen in energy subsidies as petrol prices were hiked over 50 per cent.
In company news, Saudi Cement Co said it would take a charge of 66.2 million riyals this quarter due to writing off two kilns that would remain idled indefinitely.
On Monday, Saudi Arabia announced a record high $98 billion budget deficit. “The deficit will be financed through a plan that considers the best available options, including domestic and external borrowing”.
Despite the decline in prices and the nation’s dependence on oil exports, Saudi Arabia has continued to maintain the same production levels and has chosen not to cut output alone in an effort to push up prices. The 2015 budget was based on Brent price of US$47 a barrel and the same level of crude exports.
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As the deficit has swelled, the riyal has dropped in the forwards market to its lowest since 1999 because of fears Riyadh may eventually have to abandon its peg to the US dollar.
