Saudi Arabia to cut its budget on falling oil prices
03 Dec 2014
(MENAFN) Saudi Arabia could impose its first budget cuts since 2002 due to plunging oil prices, though they cuts are not expected to be large enough to stop growth in the Arab world’s biggest economy, The Peninsula Qatar reported.
Saudi Arabia, which gets about 90 percent of its revenue from oil exports, is believed to need an average oil price above USD90 to balance its budget this year.
Last month, the International Monetary Fund said that it expects that Saudi Arabia would enjoy a fiscal surplus of 1.6 percent of gross domestic product (GDP) in 2015, but now after the sharp fall in oil prices, reaching their lowest in five years, some experts are now expecting the country might post a deficit of 1 percent in its budget though they still do not expect big cuts in state spending due to the government building fiscal reserves over the years to cover any possible deficits.
These latest figures mean that Saudi economy, which grew an annual 3.8 percent in the second quarter, should continue its growth, with the major infrastructure projects, such as the USD22.5bn plan to build a metro rail system in Riyadh by 2019 not being at risk.
The Saudi government, which usually overspends over its budget by an annual average of 25 percent during the 2004-2013 period, said that its reserves at the central bank has totaled USD241 billion at the end of October, which is enough to cover an annual budget deficit of 3 percent of GDP for about 10 years