Thursday 17 September 2015

$50 Oil Puts Saudi Budget Deficit Beyond Reach of Spending Cuts - Bloomberg Business

$50 Oil Puts Saudi Budget Deficit Beyond Reach of Spending Cuts - Bloomberg Business:

"The slump in oil prices has spurred Saudi Arabia’s government to search for savings, contemplate project delays and sell bonds for the first time since 2007. It won’t be enough to prevent the kingdom’s biggest deficit in decades.
“The revenue drop is so severe that it’s unrealistic to expect spending cuts to have any meaningful impact on the deficit in the near term,” said Simon Williams, HSBC’s chief economist for central and eastern Europe, the Middle East and North Africa. The longer oil prices stay weak, “the greater the pressure on the authorities,” he said in an e-mail.
Though Saudi Arabia has reserves to cope, analysts said that using them to avoid further cost-cutting would put its credit rating at risk while delaying policies with a longer-term benefit, including the reduction of subsidies and the introduction of more taxes to diversify revenue beyond oil. Even after the measures already announced, Riyadh-based Samba Financial Group estimates state outlays will rise by 0.4 percent next year."



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