Saudi Arabia on Monday passed its budget for next year, projecting a widening deficit in the face of tumbling crude oil prices and production cuts that have hit the top producer’s revenues.
The kingdom projected a shortfall of US$50 billion for the year, up US$15 billion from this year’s budget, an official statement read out on state TV said.
It predicted that next year’s deficit would grow to 6.4 percent of GDP, up from 4.7 percent this year.
The statement released after a Cabinet meeting chaired by Saudi Arabian King Salman said that Riyadh would also cut spending for next year in a rare belt-tightening measure.
Spending was set at US$272 billion, down 7.8 percent on this year’s estimates, while revenue was estimated at US$222 billion, also lower by 14.6 percent.
Income from oil was projected at US$136.8 billion, down from US$160.5 billion this year, the Saudi Arabian Ministry of Finance said.
Crude oil prices have remained sluggish at about US$64 a barrel, despite additional production cuts agreed by OPEC and its allies last week. Oil income accounts for about two-thirds of Saudi Arabian public revenue.
Salman said that his government is determined to continue diversifying the kingdom’s sources of income and shift it away from its reliance on oil.
The finance ministry reported that the kingdom spent US$279.5 billion and had revenue of US$244.5 billion this year, both lower than projections, leaving the shortfall at US$35 billion.
Saudi Arabia, which pumps just under 10 million barrels of oil per day, has posted a budget shortfall since 2014, when oil prices crashed, accumulating US$358 billion in deficits up to the end of this year, government data showed.
The finance ministry has projected that spending would continue to contract until 2022 as a result of weak crude oil prices and production cuts.
To plug the growing budget shortfall, Saudi Arabia withdrew from its reserves, borrowed from domestic and international markets, and last month floated 1.5 percent of state energy giant Saudi Aramco.
That generated about US$25.6 billion in the world’s biggest ever initial public offering.
OPEC and its allies last week agreed to an additional output cut of 500,000 barrels of oil per day, set to start next month, along with an already agreed reduction of 1.2 million barrels per day.
Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman said that the kingdom would unilaterally trim another 400,000 barrels per day to support sagging prices.
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