RIYADH: Saudi Arabia’s government is considering making significant cuts to its 2016 budget because of the continued drop in oil price.
Two sources told Bloomberg that the country is seeking advice on reviewing its budget for next year, which could lead to delays or reduce some of the country’s infrastructure projects.
The report suggests that the government could cut its budget by as much as 10 percent, roughly $10 billion based on the country’s current investment spending of $102 billion (382 billion riyals). Spending on areas like public sector salaries wouldn’t be affected, according to the sources.
The International Monetary Fund (IMF) projected that the Saudi government would run a fiscal deficit of around 20 percent of GDP in 2015 – much larger than the 14.2 percent gap that it had forecast in May, and the biggest deficit since at least 1999, IMF records show.
Oil accounts for 90 percent of the country’s revenue, and with the price dropping from $110 a barrel last April to the current price of $45, Saudi’s finances are coming under increasing pressure, with the current budget deficit covered by drawing down financial reserves.
Saudi Arabia sold $5.33 billion (20 billion riyals) of debt on earlier this month and said it would issue further sovereign bonds, as it tries to close a budget deficit caused by the collapse in oil prices.