A file photo of Saudi Arabia's King Salman. PHOTO: AFP
RIYADH: Saudi King Salman on Wednesday said he has ordered economic reforms to diversify sources of income and reduce high dependence on oil following a sharp drop in crude prices.
“Our vision for economic reform is to increase the efficiency of public spending, utilise economic resources and boost returns from state investment,” he said in an address to the Shura Council.
“I have directed the Council of Economic and Development Affairs to devise the necessary plans, policies and programmes to achieve that,” he told the consultative body, without elaborating.
Oil income accounts for more than 90 per cent of public revenues in Saudi Arabia.
The world’s largest oil exporter, Saudi Arabia is facing an unprecedented budget crunch as the price of oil has dropped by more than 60 per cent since mid-2014.
At midday Wednesday, benchmark Brent North Sea crude for delivery in February stood at $36.50 a barrel, hovering just above an 11-year low.
The king said Saudi Arabia carried out a large number of mega infrastructure projects and boosted its fiscal reserves in the past several years when oil prices were high.
The size of the fiscal buffers has enabled the kingdom to overcome the consequences from the sharp decline in oil revenues, said the king, adding that development projects have not been affected by the drop.
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Saudi Arabia is projected to post a record budget deficit of around $130 billion for this year, the International Monetary Fund says.
The IMF has advised Riyadh to implement reforms, including expanding non-oil revenues, warning that failure to do so would deplete its foreign reserves.
The kingdom, which has been pumping around 10.4 million barrels a day, has withdrawn funds from its foreign reserves and also issued bonds to finance the budget deficit.
At the end of October, its reserves fell to $644 billion from $732 billion at the end of last year.
The finance ministry has issued bonds worth $20 billion for the domestic market.
In 2014, Saudi Arabia posted a budget deficit of $17.5 billion, only its second since 2002.
An indirect acknowledgement that the USA has broken the back of the Oil Cartel which has unethically manipulated the price of oil for most of our lives. Oil is now going to be sold based on the basic law of supply/demand which is about half of what the Oil Cartel was charging. I for one have no sympathy for Saudi Arabia or any of the other Cartel members who have been gouging the World for decades. The World economy will improve especially in countries like Pakistan which are dependent on foreign oil/gas.Recommend
Who will work to diversify. Oil industry is run by imported labor . Would the industry be also run by non Saudis ? They will always depend on oil or revenue they earn due to Umbra and Hajj. They are a useless lot who can only create trouble for others.Recommend
What Saudi Universities have suddenly produced scientists and entrepreneurs to start up new ventures or are these factories for toothpaste and hand washing?? This King is the King of Kings who come out of some special academy. Recommend
Saudi economy is already in the process of the diversification by ample investment in Hajj business. Recommend
What else can he diverse to?? Dates and Camels??Recommend
The peak oil crisis is looming and the KSA bond issue, economic diversification and global climate change agreement are all tell tale signs. Recommend
Saudis have a hen which lays gold egg. Increase visa and other charges on Haj & UmraRecommend
To diversify into other sectors that earn foreign exchange, a country requires trained Human Capital which is absent in the kingdom as it never invested in it. The report does not indicate in which sector the kingdom wants to diversify in order to keep budget deficit low.Recommend
Saudi Arabia plans to diversify its economy? That’s a joke isn’t it?Recommend