RIYADH: Saudi Arabia announced a 2015 budget with a huge deficit on Thursday as the world’s largest crude exporter begins to feel the impact of its own decision not to shore up oil prices.
The government announced the $38.6 billion deficit in a statement read on state-run television, adding that it would nonetheless boost projected spending by tapping its vast financial reserves.
The lead producer in the Organisation of the Petroleum Exporting Countries (Opec), Saudi Arabia has insisted the cartel will not move to strengthen global oil prices despite a drop of nearly 50 per cent since June.
Opec has maintained a production ceiling of 30 million barrels per day, in a move analysts say is aimed at stifling competition from new market players with higher costs, in particular North American shale oil producers.
Saudi officials have vowed not to boost production no matter how low prices go, regardless of the impact on the country’s coffers.
The budget announced for next year sees spending at 860bn riyals ($229.3bn) and revenues at 715bn riyals ($190.7bn).
Projected spending is slightly higher than planned for this year, but revenues are 140bn riyals lower than estimates for 2014, said the statement read after a cabinet session chaired by Crown Prince Salman bin Abdulaziz.
The 2015 budget shortfall is the first deficit projected by the Opec kingpin since 2011 and the largest ever for the kingdom.
Over the past decade, Saudi Arabia overspent budget projections by more than 20pc and if the trend is maintained next year, analysts say the deficit will be much higher.
“I believe we are headed for a difficult year in 2015. I think the actual deficit will be around 200bn riyals because actual revenues are expected to be lower than estimates,” Saudi economist Abdulwahab Abu-Dahesh told AFP.
“Spending in the budget is not in line with the sharp decline in oil prices,” Abu-Dahesh said.
The finance ministry also announced the 2014 preliminary actual budget figures, saying it expects a deficit of 54bn riyals ($14.4bn) this year. It is the first actual budget shortfall since 2009.
HIGHEST SPENDING IN HISTORY: The ministry said that, according to the preliminary figures, revenues in 2014 were 22pc higher than projected. But preliminary spending was at $293.3bn, the highest in the kingdom’s history and about $33bn more than expenditures in 2013.
The spending rise was due to huge expansion projects at Muslim holy sites in Mecca and Medina, an increase in spending on development projects and foreign aid, the finance ministry said.
Published in Dawn, December 26th, 2014