“Stratfor added that Saudi Arabia could modify its output in the second half of 2016 after assessing the price impact of Iranian oil and evaluating declining commodity production in the United States”. The International Monetary Fund had projected a deficit of $130bn.
Public revenues are the lowest since 2009 when oil prices dived as a result of the global financial crisis. Government revenues came in at $162 billion, 15% lower than forecasts, while expenses were almost $260 billion, exceeding estimates by 13%.
Prices on fuel products were raised by up to 80 percent as of midnight, including a 50 percent jump in the price of the most commonly sold petrol to 0.90 riyals ($0.24) per litre.
Gas prices have been increased to $1.25/MMBtu from $0.75/MMBtu, and ethane, the main feedstock for petrochemicals, to $1.57/MMBtu, up more than 100% from the long-standing fixed price of $0.75/MMBtu, the official Saudi Press Agency said late Monday.
Mr Naimi said Saudi consumers – who have been used to record low prices at the pumps – will now be forced to use fuel more “efficiently” in the face of subsidy cuts. Oil sales will make up about 70 per cent of the country’s budget next year, said John Sfakianakis, a Riyadh- based economist at Ashmore Group Plc and a former adviser to the government.
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 U.S. shale oil fields out of business.
However, those stocks surged 9.9 and 9.6 percent respectively on Monday in anticipation of the budget, so they may not rise further in the short term.
Saudi Arabia’s government debt has also risen sharply, after it issued 98 billion riyals worth of bonds to local markets earlier in the year.
The IMF has warned Riyadh that failure to cut spending and implement reforms will eat up the country’s fiscal reserves in just five years.
A quarter of next year’s spending, or $57 billion, has been allocated for defence and security expenditures, the ministry said. Non-oil revenue increased from SR 126.8 billion in 2014 by SR 36.7 billion to SR 163.5 billion; an increase of 29 per cent compared to 2014, indicating that the country is slowly peeling away from its hydrocarbons-based economy and diversifying into other sectors.