Home' Trinidad and Tobago Guardian : December 30th 2015 Contents A17
Wednesday, December 30, 2015 www.guardian.co.tt Guardian
RIYADH---Saudi Arabia announced a
record budget deficit and cuts to fuel and
utility subsidies as the oil powerhouse suf-
fers from a drastic fall in global crude
Petrol prices in the kingdom were to rise
by more than 50 per cent on some products
from Tuesday, authorities said, after the
world s largest crude exporter said it had
posted a deficit of US$98 billion in 2015.
The finance ministry said it was planning
a series of measures to contain spending,
including a five-year programme to cut sub-
sidies on electricity and fuel.
Authorities moved quickly after the budget
figures were released, with the official SPA
news agency reporting the increase of petrol
prices and saying the government would
also cut subsidies for electricity, water, diesel
Such subsidies are a highly sensitive issue
in Saudi Arabia, where residents have grown
accustomed to low utility and fuel costs.
The price of higher-grade unleaded petrol
will rise to 0.90 riyals (US$0.24) per litre
from 0.60 riyals, a hike of 50 per cent.
Lower-grade petrol will hike to 0.75 riyals
from 0.45 riyals per litre, up two thirds.
National oil conglomerate Aramco said
on Twitter it was immediately closing petrol
stations until midnight on Monday, when
it will resume sales at new prices.
The finance ministry said it is also con-
sidering plans to raise charges on public
services and to apply value-added tax in
cooperation with other Gulf Arab nations,
which are facing similar pressure from the
oil price drop.
It unveiled economic and fiscal reforms
to make the budget more sustainable, includ-
ing a programme to contain spending
growth, especially for wages and benefits
Saudis cut fuel, utilities subsidies
which accounted for half of the 2015 budget.
Riyadh also projected a shortfall of US$87 billion
in next year s budget, the first since King Salman
took over the country in January.
The finance ministry said in a statement that rev-
enues in 2015 were estimated at 608 billion riyals
(US$162 billion), the lowest since 2009 when oil
prices dived as a result of the global financial cri-
sis.The budget "comes amid challenging international
and regional economic and financial conditions"
including "very low oil prices," the statement said.
The 2015 deficit is the highest in the history of
Saudi Arabia, which relies on oil for 90 per cent of
public revenues, but was not as big as some expect-
ed.Income for 2015 was 15 per cent lower than pro-
jections and 42 per cent less than in 2014, after oil
prices fell by almost two thirds since mid-2014 to
below US$$40 a barrel.
The dive is largely due to Saudi Arabia s own policies
and those of other OPEC nations, who are refusing
to cut oil production as they seek to drive less-com-
petitive players, including US shale producers, out
of the market.
Oil prices slid in response to Monday s statement,
with the US benchmark West Texas Intermediate
losing US$$1.29 to US$$36.81 a barrel, while Brent
crude shed US$$1.27 to US$$36.62 a barrel in Lon-
The International Monetary Fund had projected
the 2015 deficit to be around US$$130 billion and
other reports also put it above US$$100 billion.
The ministry said oil income made up just 73 per
cent of total revenues in 2015, way below its con-
tribution in previous years. Meanwhile, non-oil rev-
enues rose 29 percent to US$43.6 billion.
The 2016 budget projects revenues at US$137 billion,
the lowest in six years, and spending at US$224
billion, slightly below 2015 projections of US$229
Spending this year came in at $260 billion, the
ministry said, almost equal to 2013 expenditures and
down 6.6 per cent from 2014. Saudi Arabia normally
overspends its budget projections by around 20 per
Riyadh maintained high spending this year,
and launched a military intervention against
Iran-backed rebels in Yemen, by tapping into
the huge fiscal reserves it accumulated
when oil prices were high.
A quarter of next year's spending, or
US$$57 billion, has been allocated for
defence and security expenditures, the
ministry said. It was unclear how much the
intervention in Yemen was costing as Saudi
Arabia has not previously released figures
on defence spending.
The IMF has warned Riyadh that failure to
cut spending and implement reforms will
eat up the country's fiscal reserves in just
The kingdom withdrew more than US$$80
billion this year from the reserves, which
stood at US$732 billion at the end of 2014,
and issued bonds worth around US$20
The ministry also said nominal gross
domestic product for 2015 is estimated to
drop 13.35 per cent to US$653 billion. The
economy was forecast to grow by 3.35 per
cent this year. (AFP)
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