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Saudi reserves expected to fall to $500b this year
By AFP - Feb 02,2016 - Last updated at Feb 02,2016
RIYADH — Saudi Arabia's fiscal reserves dropped to a four-year low last year as the government sought to finance a budget deficit caused by plunging oil revenues, a report said Tuesday.
The reserves of the world's largest crude exporter dropped to $611.9 billion at the end of 2015, the lowest level since 2011, down from $732 billion a year before, the Saudi Jadwa Investment indicated in an economic report.
Jadwa said it expected reserves to fall to around $500 billion by the end of 2016, after oil prices fell by three quarters since mid-2014.
The kingdom, the second largest crude producer after Russia, posted a record budget deficit of $98 billion last year after oil income dived by 60 per cent to just $118 billion.
Riyadh also projected an $87 billion deficit for this year but Jadwa forecast the shortfall to be more than $107 billion.
To help finance the budget deficit, the kingdom in December 2015, introduced a series of austerity measures raising fuel prices by up to 80 per cent and increasing the prices of electricity, water, natural gas and others.
Jadwa said it expected inflation to soar this year to 3.9 per cent, from 2.2 per cent last year, as a result of the price hikes.
The kingdom also issued bonds in the domestic market worth $30 billion.
The International Monetary Fund last month revised downward Saudi gross domestic product (GDP) growth to just 1.2 per cent this year, the lowest since 2009. Its GDP grew 3.4 per cent in 2015.
Saudi Arabia is currently pumping 10.2 million barrels of crude per day.
Recently, hundreds of Saudi Arabian officials and businessmen discussed ways to rescue the economy from low oil prices, by developing new industries and giving opportunities to the private sector.
As cheap oil pressures its currency and opens up a record state budget deficit of around $100 billion, Saudi Arabia, assisted by a small army of Western consultants who are believed to number in the hundreds, is plotting its biggest shake-up of economic policy in well over a decade.
Stakes in the operations of big state companies, including national oil giant Saudi Aramco, would be sold off; underused assets owned by the government, such as vast land holdings and mineral deposits, would be made available for development.
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