Saudi Arabia announces $53bn budget deficit for 2017

Saudi Arabia announces $53bn budget deficit for 2017
2 min read
22 December, 2016
Saudi Arabia has announced a projected 2017 budget deficit of $53 billion after a year of cutbacks in the wake of cheaper oil prices and a costly war in Yemen.
Cheaper oil prices have adversely affected the kingdom's economy [AFP]
Saudi Arabia on Thursday projected a 2017 budget deficit of about $53 billion after government cost-cutting in response to cheaper oil prices.

The Arab world's largest economy revealed its budget after a year of cutbacks.

Expenses next year will reach 890 billion riyals ($237 billion) against revenues of 692 billion riyals ($184 billion), the cabinet said in a statement.

It said this year's deficit will be 297 billion riyals ($79 billion), 8.9 percent below the predicted budget for 2016.

"This budget comes at a time of a highly volatile economic situation... and which led to a slowdown in world economic growth and a drop in oil prices that impacted our country," King Salman said in a television address.

The financial challenges for Saudi Arabia stem largely from the fall in the global price of oil over the past two and a half years.

It is not yet been announced how the 2016 deficit stacks up as a percentage of the economy. It was 15 percent of GDP in 2015.

Revenues for this year are expected to be 528 billion riyals ($141 billion), with non-oil revenues accounting for 38 percent of total income, up from 28 percent last year, following the kingdom's efforts to diversify its economy.

The budget also revealed a fall in defence spending. Saudi Arabia, which has fought a costly war in Yemen for nearly two years, projects a drop in 2017 to 191 billion riyals ($51 billion) - almost 11 percent lower then the figure which Riyadh said it expected to spend in the 2016 budget year.

The plunge in global oil prices led Riyadh to intensify economic reforms, which are being led by Salman's son, Deputy Crown Prince Mohammed bin Salman, 31.

In April the prince released the Vision 2030 programme for diversifying the oil-dependent economy.

At its heart is a plan to float less than five percent of state oil giant Saudi Aramco on the stock market, with the proceeds helping to form what will be the world's largest state investment fund, holding about $2 trillion in assets.

The kingdom has also scrapped major building projects, cut cabinet ministers' salaries and imposed a wage freeze on civil servants in the wake of last year's record deficit of $97 billion.