RIYADH — Saudi Arabia announced a record budget deficit and cuts to fuel and utility subsidies on Monday as the oil powerhouse suffers from the drastic fall in crude prices.
Petrol prices in the kingdom were to rise by more than 50% on some products from Tuesday, authorities said, after the world’s largest crude exporter said it had posted a deficit of $98bn in 2015.
Riyadh also projected a shortfall of $87bn in next year’s budget, the first since King Salman took over the country in January.
The finance ministry said in a statement that revenues in 2015 were estimated at $162bn, the lowest since 2009 when oil prices dived as a result of the global financial crisis.
Income for 2015 was 15% lower than projections and 42% less than in 2014, after oil prices fell by more than 60% since mid-2014 to below $40 a barrel.
The dive is largely due to Saudi Arabia’s own policies and those of other Opec nations, who are refusing to cut oil production as they seek to drive less competitive players, including US shale producers, out of the market.
Spending this year came in at $260bn, the ministry said, almost equal to 2013 expenditures and down 6.6% from 2014.
The 2015 deficit is the highest in the history of Saudi Arabia, which relies on oil for 90% of public revenues, but was not as big as some expected.
The International Monetary Fund had projected the 2015 deficit to be around $130bn and other reports also put it above $100bn.
The 2016 budget projects revenues at $137bn, the lowest since 2009, and spending at $224bn, slightly below 2015 projections of $229bn.
Saudi Arabia normally overspends its budget projections by around 20%. The statement noted that the budget “comes amid challenging international and regional economic and financial conditions” including “very low oil prices”.
Riyadh maintained high spending this year, and launched a military intervention against Iran-backed rebels in Yemen, by tapping into the huge fiscal reserves it accumulated when oil prices were high.
The finance ministry said it was planning a series of measures to contain spending including a five-year programme to cut subsidies on electricity and fuel.
Authorities moved quickly after the budget figures were released, with the official SPA news agency reporting the increase of petrol prices and saying the government would also cut subsidies for electricity, water, diesel and kerosene.
Such subsidies are a highly sensitive issue in Saudi Arabia, where residents have grown accustomed to low utility and fuel costs.
The price of higher-grade unleaded petrol will rise to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50%, and for lower-grade petrol to 0.75 riyals ($0.20) from 0.45 riyals per litre, a 67% rise.
National oil conglomerate Aramco said on Twitter it was immediately closing petrol stations until midnight on Monday, when it will resume sales at new prices.
The finance ministry said it is also considering plans to raise charges on public services and to apply value-added tax (VAT) in cooperation with other Gulf Arab nations, which are facing similar pressure from the oil price drop.
It unveiled economic and fiscal reforms to make the budget more sustainable, including a programme to contain spending growth, especially for wages and benefits which accounted for half of the 2015 budget.
A quarter of next year’s spending, or $57bn, has been allocated for defence and security expenditures, the ministry said. It was unclear how much the intervention in Yemen was costing as Saudi Arabia has not previously released figures on defence spending.
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.
The kingdom withdrew more than $80bn this year from the reserves, which stood at $732bn at the end of 2014, and issued bonds worth around $20bn.