Saudi Arabia announced a 2015 budget with a huge deficit 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 nearly $39 billion deficit in a statement read on state-run television, adding that it would nonetheless boost projected spending by tapping its vast financial reserves.
OPEC's lead has insisted the cartel will not move to strengthen global oil prices despite a drop of nearly 50 percent 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, BRecorder reported.
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 $229.3 billion (860 billion riyals) and revenues at $190.7 billion (715b riyals).
Projected spending is slightly higher than planned for this year, but revenues are 140 billion riyals lower than estimates for 2014, said the statement 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.
Overspent Budget
Over the past decade, Saudi Arabia overspent budget projections by more than 20 percent and if the trend is maintained next year, analysts say the deficit will be much higher. "We are headed for a difficult year in 2015. The actual deficit will be around 200 billion riyals because actual revenues are expected to be lower than estimates," Saudi economist Abdulwahab Abu-Dahesh said. "Spending in the budget is not in line with the sharp decline in oil prices,"
The Saudi Finance Minister Ibrahim al-Assaf announced the 2014 preliminary actual budget figures, saying it expects a deficit of $14.4 billion (54b riyals) this year. It is the first actual budget shortfall since 2009.
The minister said that, according to the preliminary figures, revenues in 2014 were 22 percent higher than projected. But preliminary spending was at $293.3 billion, the highest in the kingdom's history and about $33 billion more than expenditures in 2013.
The price of oil, which makes up around 90 percent of public income in Saudi Arabia, has lost about half of its value since June due to a production glut, weak global demand and a stronger US dollar.
Al-Assaf said this month that Riyadh will continue massive public spending despite the sharp decline. In royal decrees issuing the budget, Saudi King Abdullah called for "rationalization of spending" and for the "accurate and efficient implementation of the budget" in 2015. If oil prices remain at the current level of about $60 a barrel for benchmark Brent crude, Saudi Arabia is expected to lose half of its oil revenues of $276 billion posted in 2013. Oil income this year is expected at $248 billion.
