Saudi Arabia generates 90 per cent of its income from oil - a commodity which
has recently plummeted in value
Adam Leyland Friday 23 October 2015
Saudi Arabia’s cash reserves are in free-fall and the country could have only five years of financial assets remaining due in large part to the fall in oil prices, according to a report by the International Monetary Fund (IMF).
In its World Economic and Financial Surveys, released every October, the IMF said that the kingdom will suffer a negative 21.6 per cent “General Government Overall Fiscal Balance” in 2015 and a 19.4 per cent negative balance in 2016, a massive increase from only -3.4 per cent in 2014.
Saudi Arabia currently has $654.5 billion in foreign reserves, but the cash is disappearing quickly.
The Saudi Arabian Monetary Agency has withdrawn $70 billion in funds managed by overseas financial institutions, and has lost almost $73 billion since oil prices slumped, according to Al-Jazeera. Saudi Arabia generates 90 per cent of its income from oil.
Earlier this year the kingdom doled out a massive $32 billion spending spree distributed to the public, to celebrate the coronation of King Salman Bin Abdulaziz Al Saud.
In 2015 Saudi Arabia also bypassed Russia to take over the world’s third spot in military spending, with a defence budget of $80.8 billion. Meanwhile the war in Yemen, being carried out mostly by the kingdom, shows no sign of abating.
The country is now expected to run a deficit of more than 20 percent of GDP in 2015, according to the IMF.
Masood Ahmed, the IMF’s Middle East director, told reporters in Dubai that the fall in oil prices amounted to a ‘staggering $360 billion this year alone’.
Because the oil price drop is likely to be large and persistent, the kingdom is expected to join other oil exporters and make substantial budget cuts, Al-Jazeera wrote.
But even this may be counter-productive if consumers and companies decide to hold back consumption and investment in response to the cuts.
