Saudi Posts Record Deficit Amid Oil Slump

[Kurgen]

Saudi Arabia is to consider major changes to its high spending, low tax regime after the plunge in world oil prices saw it post a record budget deficit of $98bn (£66bn).

The kingdom's finance ministry said it was looking at measures such as applying VAT and raising charges on public services. There will also be a review of prices of heavily-subsidised power and fuel.

It is the second deficit year in a row for the kingdom, which is the world’s largest oil exporter. But the shortfall was not as big as some expectations that it could be as large as $130bn (£87bn).

Saudi Arabia also projected an $87bn (£58bn) shortfall for 2016.

The figures come after the price of Brent crude recently sank close to $36 a barrel, an 11-year low. It has slumped from a high of more than $115 in the summer of 2014.

Saudi revenues have fallen to their lowest since 2009 when the global financial crisis struck. Income was 42% lower than in 2014. Oil normally contributes the vast majority of public income.

But despite the slump in the world oil market, Riyadh has maintained high spending and launched an expensive military intervention in Yemen, drawing on huge fiscal reserves it had accumulated when prices were high.

They have plunged over the last 18 months thanks to a world supply glut and have stayed low with the Saudi-dominated Organisation of Petroleum Exporting Countries (OPEC) opting not to cut production in response.

Saudi Arabia is counting the cost of a policy of allowing the oil price to drop as it seeks to drive less competitive producers such as US shale oil fields out of business.

Saudi Posts Record Deficit Amid Oil Slump

[Kurgen]

I feel so sorry for them

[Latindancer]

Indeed. You could almost have a war for that much !