Revenue is forecast to decline to 513.8 billion riyals ($136.98 billion), from 608 billion riyals ($162.1 billion). Total defence spending in the Gulf was down 6 per cent on the previous year, but the overall Saudi fiscal deficit, estimated at 367bn riyals (£64bn), gives particular cause for concern.
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Suhaimi, however, said the deficit is “considered an acceptable figure” under the present circumstances, with oil languishing at its lowest in several years.
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The budget also contained spending cuts of 135 billion riyals, a drive to raise revenues from taxes and privatisation and promises to make government projects more efficient.
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The Saudi government said that, because of “excessive” volatility in crude oil prices, a budget support provision of $48.7 billion was established to help finance projects designated as national priorities.
Non-oil revenues rose by 29 per cent this year to $43.5 billion, contributing 27 per cent to public revenues. The Brent oil price averaged about $54 a barrel this year but is now around $37.
Contracts used to bet whether Saudi Arabia will abandon its peg to the dollar climbed by the most in eight years after the world’s biggest oil exporter cut subsidies and spending for next year.
This is because it produces so much oil that it has the power move prices – Saudi Arabia is the largest country in the 13-member OPEC cartel of oil producers.
The price of brent crude oil is so low that U.S. shale oil producers have been forced to cut their output and costs by improving technology and concentrating on core areas. Saudi income for 2015 was 15 percent lower than projections and 42 percent less than in 2014. He said Saudi Arabia had increased its military and security spending in 2015 by about 20 billion riyals because of the conflict. The budget is also being heavily scrutinized as it was prepared under the guidance of a newly-formed Council of Economic and Development Affairs, which is headed by the king’s 30-year-old son, Deputy Crown Prince and Defense Minister Mohammed bin Salman.
The Saudis plan to shrink the deficit to 326 billion riyals by slashing subsidies for petrol, electricity, water, diesel and kerosene, the budget papers revealed.
A number of structural economic reforms – including “privatising a range of sectors and economic activities” – would also be planned, the finance ministry added without giving details.
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However, it is expected that Saudi Arabia will continue to reduce its dependence on oil in its budget for the coming year with a sharp drop in the price of oil.
