KABUL: (MEP) Saudi Arabia has raised domestic energy prices by as much as 40 percent after the world’s leading oil producer announced a record $98bn budget deficit on Monday citing rock-bottom global petroleum prices.
The budget deficit is the highest in the history of Saudi Arabia, but was not as big as some expected. The International Monetary Fund had projected a deficit of $130bn.
The kingdom has seen a sharp drop in revenues as oil prices have fallen more than 60 percent since mid-2014 to below $40 a barrel.
Public revenues are the lowest since 2009 when oil prices dived as a result of the global financial crisis. Saudi income for 2015 was 15 percent lower than projections and 42 percent less than in 2014.
In order to address the situation, the Gulf kingdom has set the price of 95 octane gasoline at 0.90 riyals ($0.24) per liter up from 0.60 riyals per liter – a hike of 40 percent. The price increase takes effect on Tuesday, the official SPA news agency said on its Twitter account.
The decision came hours after the ministry of finance said it will slash subsidies for electricity, water, diesel and kerosene over the next five years.
Revenues were estimated at $162bn – well below projections and 2014 income, while spending came in at $260bn, finance ministry officials announced at a press conference in the capital, Riyadh.
“About 80-90 percent of government income comes from oil,” Walid Arab Hashem, an economist and former member of the Saudi Shura Council, told Al Jazeera.
But he said Saudi Arabia has huge foreign reserves above $700bn that it can use to finance the gap in the budget.
Hashem said from the Saudi city of Jeddah “It may also issue some bonds to borrow from the market depending which is better for it”
