Saudis Unveil Radical Austerity Programme

Saudi Arabia on Monday unveiled spending cuts in its 2016 budget, subsidy reforms and a call for privatisations to rein in a yawning deficit caused by the prolonged period of low oil prices.

The Gulf kingdom has kept oil production at high levels in an attempt to force out higher-cost producers, such as shale, and retain its market share. But this year’s deficit ballooned to 367bn Saudi riyals ($97.9bn,) or 15 per cent of gross domestic product, as oil revenues fell 23 per cent to Sr444.5bn.

Seeking to ward off future fiscal crises, the ministry of finance confirmed wide-ranging economic reforms, including plans to “privatise a range of sectors and economic activities”.

Riyadh would revise energy, water and electricity prices “gradually over the next five years” to optimise efficiency while minimising “negative effects on low and mid-income citizens and the competitiveness of the business sector,” it added.

The first reforms will be effective from Tuesday, including an increase in gasoline prices, a rise in electricity tariffs for the wealthiest consumers, a modest increase in water costs for all, and changes to all energy prices for industrial users.


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.