As gas prices tank, Saudi Arabia might go broke in 5 years
CAIRO: Saudi Arabia may run out of financial assets needed to support spending within five years amid the drop in oil prices if the government maintains current policies, the International Monetary Fund said, underscoring the need for measures to cut the nation’s budget deficit.
The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said.
Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to shore up its public finances. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain.
But the IMF said measures being considered by oil exporters “are likely to be inadequate to achieve the needed medium-term fiscal consolidation,” the IMF said. “Under current policies, countries would run out of buffers in less than five years because of large fiscal deficits.”
Saudi Arabia accumulated hundreds of billions of dollars in the past decade to help the economy absorb the shock of falling prices. The kingdom’s debt as a percentage of gross domestic product fell to less than 2 percent in 2014, the lowest in the world.
The recent decline in the price of crude, which accounts for about 80 percent of Saudi Arabia’s revenue, is prompting Riyadh to delay projects and sell bonds for the first time since 2007. Net foreign assets fell to the lowest level in more than two years in August, with the kingdom fighting a war in Yemen and avoiding economic policies that could trigger social or political unrest.
The IMF expects the Saudi budget deficit to rise to more than 20 percent of gross domestic product
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