Dictators in debt: Saudi Arabia's pending deficit:
"The Kingdom of Saudi Arabia (KSA) could be heading for financial turmoil, potentially posting a deficit in 2015. For the Al Saud monarchy, which depends on its massive cash reserves to quell dissent against the regime, recent warnings from the International Monetary Fund (IMF) are not to be taken lightly.
Reuters reported that a recent IMF report “painted the most ominous picture yet of looming financial pressures on the Kingdom.” According to the IMF, the country could post a deficit as early as 2015, nearly three years earlier than previous estimates. Following years of warnings to cut down on massive state spending, the IMF expected Saudi Arabia to undertake financial consolidations in 2013, but these never materialised. To the contrary, continued domestic dissent and increased military involvement in regional affairs demanded an increase in government spending, and a global rise in oil prices facilitated this. If spending continues at this rate, Saudi Arabia needs an oil price of $89 a barrel to balance its budget, up $13 a barrel from what it required in 2012. Unfortunately for the Al Saud family, oil prices seem to have reached their peak, and are moving in the opposition direction from what an oil-backed monarch would hope.
Saudi Arabia has a history of purchasing stability, (often defined as temporarily quelling dissent) both domestically and abroad. For years, Al Saud has been able to sustain its cash-for-loyalty contract with citizens because oil prices were high and the country was running a surplus. Indeed, citizens of KSA are the only in the world to be called after their leaders: “Saudis.” But even the wealthiest of monarchs should know that “stability” built on social handouts is only as sustainable as the nation’s budget. And Saudi’s massive cash reserves are in jeopardy."
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