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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.

ABU DHABI/CAIRO — Rattled by stringent new import rules, Egypt's wheat suppliers boycotted en masse a state tender on Tuesday, pushing the world's biggest purchaser of the commodity towards a crisis that could threaten its strategic grain reserves.

Wheat supplies, critical to a bread subsidy programme that feeds tens of millions, are a red line in Egypt, the most populous Arab country. When Egyptians rose up against autocrat Hosni Mubarak in 2011, a signature chant was "bread, freedom and social justice".

Egypt's state grain buyer, the General Authority for Supply Commodities (GASC), confirmed it received no offers in its tender, and said it was now looking for a direct contract for 3 million tonnes of wheat, something traders described as unrealistic.

"Negotiations are ongoing now for the import of 3 million tonnes outside of the tender process," Mamdouh Abdul Fattah, vice chairman of GASC, told Reuters, without elaborating.

The move by traders to shun Tuesday's tender was prompted by mounting concerns that their shipments would be rejected at the country's ports because of tough new import standards.

"I cannot remember a GASC tender ever being cancelled for lack of offers, certainly not in recent years," one Europe-based trader said.

The shelved tender comes after a 63,000-tonne wheat shipment was rejected by GASC this week for containing traces of ergot, a common grains fungus, despite it meeting the 0.05 per cent threshold allowed by the authority's specifications.

Traders viewed the shipment, supplied by Bunge, as a crucial test for whether Egypt would stick to a stringent new zero-ergot standard they say makes doing business here prohibitively expensive.

"People had expected the Bunge ship to be accepted and there was great concern when it was rejected," the same European-based trader said.

Mixed signals among authorities have deepened concerns.

The supply ministry, which includes GASC, has baffled traders in recent weeks by assuring them their shipments would be permitted with ergot levels up to 0.05 per cent, a common international standard, even as agricultural authorities have rejected all shipments above zero.

Traders say it is impossible to guarantee the complete absence of ergot.

"The risk of bidding in GASC tenders is now too high. It is not possible to guarantee zero ergot content from any origin and the likelihood that cargoes will be rejected is so high that it is not possible to add a risk premium," another trader said.

So far, Egypt has rejected three wheat import shipments due to the presence of ergot, a ministry of agriculture spokesman told Reuters on Tuesday.

Uncertainty over Egypt's reliability as a customer has hit markets at a time of global oversupply, helping push European wheat prices this week to new contract lows.

Suppliers, many of whom have continued to supply Egypt despite payment delays caused by the country's ongoing foreign currency shortage, decided on Tuesday that the added layer of risk brought about by the ergot saga was simply too much.

"Unless Egypt changes its rules it could face trouble importing," said the first European trader.

Critical reserves

Egypt imports around 10 million tonnes of wheat each year, most of which goes to providing cheap, subsidised bread to feed its exploding population of 90 million.

Egypt has said it has enough strategic wheat supplies to last until May 11, but this number includes shipments that had not yet arrived, including the recently rejected 63,000 tonnes.

Much of the country's calculated reserves sit outside Egypt in shipments that still may be rejected, traders said, raising the possibility that reserves could hit critical levels sooner than anticipated.

"This shows how an argument between the two ministries is risking the supply of a strategic commodity like wheat," a Cairo-based trader said. "They have to think of their reserves, if they are counting in the problematic shipments in them the figure is misleading." 

Another Cairo-based trader issued a more dire warning. "This is a matter of national security for Egypt... You cannot leave the country without wheat for bread."

NEW YORK — The oil price crash is mostly a godsend for the United States, delivering American consumers and businesses cheaper gasoline prices while hobbling the economies of adversaries like Russia.

But analysts say that the longer the oil price stays so low, the greater the chances it will generate new geopolitical problems that Washington would not like to see.

Even if the 70 per cent plunge in crude prices has battered the homegrown US oil industry, overall its economy benefits: it remains a net importer of oil and as the price of crude falls, the country's trade imbalance improves.

"There's no question that low oil prices are very good for the US. Painful for some people obviously, but for the US economy and US consumers a very good thing," said Bruce Everett, a former ExxonMobil official and professor at Tufts University.

There are apparent strategic benefits of cheap oil, too.

Countries like Russia, Venezuela and Iran, with which Washington shares chilly relations, are overly dependent on oil exports and their economies have been heavily battered by the downturn.

"If you don't care especially about the [other] oil producers, it's a plus," said George Perry of Brookings Institution. 

But the flip side is that strains from a loss of oil income can trigger destabilising behaviour as well. 

Energy specialist Jan Kalicki of the Wilson Centre posed the question of whether Russia would be less or more troublesome on the world scene if the economic climate worsens.

"The pressure is on Russia from oil prices and their general economic decline," Kalicki indicated. "You could make an argument that the Russians have been influenced to some extent by that in taking stronger steps internationally... in Ukraine or in Syria for example."

That, he said, serves to "take domestic attention away from the economic problems that it is facing".

Convergence of interests 

For Iran, the price fall comes as the country is being permitted to resume a high level of oil exports with the lifting of international nuclear sanctions on the country. 

The net effect, income-wise, is little significant immediate gain for the country, according to Anthony Cordesman, a Middle East and security expert at the Centre for Strategic and International Studies in Washington.

Even at a price of $40 a barrel, some 15 per cent higher than now, the resumption of oil exports won't have a big economic effect for the country of 84 million people.

However, he said, any surge in income could become the focus of an intensified internal power struggle pitting military versus civilian needs, according to Cordesman.

That fight "may become even more serious”, he added.

"The impact of the nuclear agreement on Iran's future petroleum revenues will be far more limited than many thought when the agreement was signed, and Iran will face serious internal pressure over how any additional revenue will be used," he elaborated.

Cordesman raised another potential pitfall from falling oil revenues across the Gulf and other producers: social turmoil as governments are forced to cut spending.

"It's very unclear that stability in the Middle East is going to get better if the same forces which tend to drive extremism, all of which relate to youth unemployment and economic growth and modernisation, are not going to be helped by a decline in oil revenues by exporting states," he said.

Kalicki added that the fall in the oil price hurts US allies too, including Mexico and Canada, both of whose economies depend significantly on crude production.

In that sense, he remarked, oil producers and consumers have similar interests in a firmer market.

"There is a rebalancing going on between purchasers and the buyers," he continued, creating "a convergence of interest developing among countries active in the oil marketplace in a way that it hasn't in the past".

For that reason, the United States needs to be concerned over "the broader impact of lower oil prices on the international economy and on countries trying to fend their way which are not creating issues internationally", he said.

Separately, many Americans are wondering when they will begin to see the benefits of cheap oil.

The technological breakthroughs of hydraulic fracturing, or fracking, have revolutionised the market for black gold, making the United States the world's leading petroleum exporter.

So why do things feel so bleak to many Americans? It may be just a question of timing, some economists say.

"On a net basis, the decline of oil prices is or will be positive for the US economy," said Angel Ubide, a senior fellow at the Peterson Institute for International Economics.

Because the negative impact is "faster and more concentrated in time", people are already feeling it, Ubide added. "If we look at it in two or three years' time, we'll be able to conclude that the decline in oil prices on net was positive. But we need some time for that."

Steve Murphy of Capital Economics sounded a note of caution, however, saying much will depend on how long oil prices remain low.

"The magnitude and duration of the slump in oil prices has far exceeded what we originally expected, and the longer it persists, the harder it is to argue that decline will ever be a net positive for the US economy," he said.

"Lower prices should have boosted real economic growth in the US. Instead, the hit to domestic investment has been unrelenting, while households still haven't spent any of their savings," he added.

US financial authorities, starting with Federal Reserve Chair Janet Yellen, insist that lower gasoline prices should free consumers' purchasing power. Premium gas at the pump is now below $2 a gallon on average (0.48 euros a litre), a seven-year low.

And yet few signs of impact on consumer spending seem to have materialised, even if the American consumer remains the locomotive of today's modest levels of US growth.

Retail sales rose only 2.1 per cent in 2015, according to official figures published Friday, down from a yearly average of 5.1 per cent from 2010 to 2014.

Murphy said Americans have saved $115 billion thanks to cheap gas over the past 18 months, but rather than spending it, "personal saving has increased by $120 billion, suggesting that households have saved every last dime from lower pump prices".

Ubide noted, however, that "once the level of savings is higher, at some point the consumer can use those savings to spend".

There are, in any case, more winners than losers in the United States, according to Reza Varjavand, an economics professor at Saint Xavier University in Chicago.

"Transportation, airlines, consumers — they all win. The losers are mostly overseas," he indicated.

Varjavand noted that stock markets have suffered and "older people who have money in retirement accounts and pensions, they lose”.

"But consumers generally win," he told AFP.

'Temporary,' you said? 

As for industry, the petroleum and manufacturing sectors are suffering.

The extractive industries — mining, coal and oil — lost nearly 130,000 jobs last year, according to the labour department. The number of active wells operating in the United States fell by 68 percent during the year. 

The finances of several US producer states are suffering to varying degrees.

"Alaska, North Dakota, Louisiana, Oklahoma, Texas, West Virginia and Wyoming are all states that will experience some amount of economic or fiscal fallout as a result of sustained low oil prices," indicated a statement from the rating service Standard & Poor's.

Low energy prices will continue to affect the inflation rate, though Yellen has said for months that this will be a "transitory effect". The US central bank wants to see a steadying of inflation around 2 per cent. 

"Transitory can be a long time," Ubide said ironically, adding that the impact on inflation of cheaper and cheaper oil is bound, mathematically, to lessen.

"At some point, the effect of the decline in price is going to disappear from inflation," he said. "The lower the oil price goes, the less impact it has on inflation on an incremental basis."

Some experts, including at Morgan Stanley, don't rule out the possibility of a $20 barrel amid the continued strengthening of the greenback.

Will the savings that American households enjoy because of cheaper oil lead to an easing of wage demands? 

Standard & Poor's seemed to nod in that direction when it noted that "low oil and gas prices provide an offset to still sluggish wage growth".

DUBAI — Standard and Poor's (S&P) does not expect Gulf states to drop their long-term monetary link to the US dollar after the sharp drop in oil prices and fiscal reserves.

"We expect [Gulf Cooperation Council] GCC countries to maintain the exchange rate peg over the medium term, mainly because we assess GCC states as having sufficient funds available to defend their currencies," the ratings agency said recently .

Five of the GCC states — Bahrain, Oman, Qatar, Saudi Arabia and United Arab Emirates — peg their currencies to the greenback while Kuwait links its dinar to a basket of currencies.

Due to the sharp drop in oil prices, most GCC states have posted a budget deficit and resorted to their fiscal reserves to finance the shortfall.

Speculation has increased recently about GCC states ending the dollar peg in favour of a flexible exchange rate regime because of the divergence between slowing GCC economies and the US economy.

In December 2015, most GCC states raised their interest rates to follow similar measures by the US Federal Reserve.

"At a time of already significant change and regional geopolitical instability, politically conservative regimes such as the GCC are unlikely to decide to increase uncertainty about their economic stability by amending this fundamental macroeconomic policy," S&P said.

The inflationary and social repercussions of a lower exchange rate are likely to outweigh the benefit to the fiscal budget, the agency added.

If the exchange rate loses value as a result of de-pegging, the GCC states could become less attractive to foreign investors, it remarked.

Saudi Arabia last month said its currency was stable despite volatility in the futures market and that it would maintain the peg to the dollar.

"In our view, the GCC pegs are to a large degree consistent with the reliance of their economies, to varying degrees, on US dollar-based oil revenues," S&P said. 

"Over the longer term, should GCC economies continue to diversify, the case for more exchange rate flexibility is likely to become more convincing," it added.

SARAJEVO — With 360 villas and apartments around an artificial lake, swimming pools, a halal supermarket and a Muslim prayer area, the “Sarajevo resort” is one of Bosnia's most ambitious residential projects to date.

It is one of dozens of real estate ventures in the picturesque hills surrounding the capital of the Balkan country that are specifically targeting visitors from Gulf states.

The lush greenery of the country has in recent years become a magnet for wealthy Arabs looking to escape the Middle Eastern summer heat. The result has been a massive boost to tourism in what is one of Europe's poorest countries.

"People from the Gulf are attracted by the natural beauty, the presence of Islam and the warmth of Bosnians," said Tarek Al Khaja, Emirati co-owner of tourist and real estate agency Al Suwaidi and Al Khaja. "They feel welcome here."

Al Khaja, who opened his business three years ago in a Sarajevo suburb, said the housing and real estate market was in "constant growth".

Prices, he added, had increased "up to 100 per cent in three years" in the Sarajevo region of Bosnia, a nation still rebuilding after its devastating 1990s inter-ethnic war.

In 2010, Bosnia began phasing out visas for nationals of most Gulf countries and the number of tourists from the region has since steadily increased to 24,500 out of 360,000 visitors to the Sarajevo area last year, according to official figures. 

"They are not the most numerous, but these Gulf tourists spend much more than others, about 150 euros per day per person, in addition to hotel costs," indicated Asja Hadziefendic Mesic, spokeswoman for the Sarajevo tourist board.

'Our brothers'

At the October opening of the Sarajevo resort, a 25-million-euro ($27-million) Kuwaiti investment, local schoolchildren waved the flags of both Bosnia and Kuwait as Bosnian Muslim political leader Bakir Izetbegovic hailed the country's rivers and greenery.

"Bosnia is a European country... it has water, forestry, mining, and energy and tourism potential. Our brothers [from the Gulf] spotted this," he said.

About 20 kilometres away in Blazuj village, another residential area is being built by the Kuwaiti company Al Diyar, which sold almost all of its luxury apartments in advance to Gulf nationals.

"So far we have invested 14 million euros. The customers are different, there is no profile," said director Abdullah Al Kulaib. 

"We had those who knew nothing about Bosnia, who never set a foot here, even some who do not like nature, but they are buying," he added, noting that the company was preparing another six similar projects.

The grandest of the proposed ventures comes from Emirati company Buroj Property Development, which in October announced a 930-million-euro investment to build an entire "tourist city" on a plot of 137 hectares.

Work is set to begin in April on the complex at the foot of Bjelasnica, one of four mountains surrounding Sarajevo. The design includes thousands of homes, several hotels, a shopping mall and a hospital.

One of the key drivers in attracting Arab investment has been the Bosna Bank International (BBI), founded in Sarajevo in 2000 by Gulf banks on Islamic banking principles, which organises an annual conference to draw such finance to the Balkans.

"This is just the beginning, we just opened the door," said Amer Bukvic, BBI director.

He suggested that political instability in the Middle East has also fuelled Gulf nationals' interest in buying a pied-à-terre in Europe, "in case it is needed".

'Mosques everywhere' 

The facilities already in place for Bosnia's Muslims, about 40 per cent of the 3.8 million-strong population, make the country an especially attractive choice for such visitors.

"When they want to eat in restaurants, they don't have to ask whether it is halal. There are also mosques everywhere where they can pray," said Al Khaja.

During and after Bosnia's 1992-1995 war, Gulf countries offered humanitarian aid and financed the reconstruction of homes and mosques, often accompanied by stricter interpretations of Islam, such as Saudi Wahabism.

A small minority of Bosnian Muslims adopted these stricter forms, and local analysts have consistently warned against the religious influence that accompanied foreign aid.

While hoteliers and restaurateurs now welcome the injection of Arab tourists' cash, even offering menus in Arabic, others have observed the phenomenon with caution.

Some media outlets and users of online forums have spoken of an "invasion" or even suggested that the region around the capital is becoming an "emirate".

"The Gaza Strip of Sarajevo", appeared as a September headline in the magazine Slobodna Bosna (Free Bosnia).

A hotelier in the capital, declining to be named, told AFP that he had benefited from the "rush" of Gulf tourists in recent years, but was firmly opposed to the construction of neighbourhoods intended only for Arab customers.

"They will use these houses and apartments maybe a month or two a year, paying once at the beginning and never again," he said. "The best tourist for a country is the one who rents a hotel room." 

WASHINGTON — The International Monetary Fund (IMF) has overhauled its lending rules for heavily indebted countries, including a rule created in 2010 to allow it to aid Greece.

Last week, the IMF abandoned the "systemic exemption" rule which it used to justify giving Greece a massive bailout despite doubts about the sustainability of the country's sovereign debt.

At the time, the crisis lender decided that a Greek debt restructuring could pose severe negative spillovers on the rest of the eurozone, thus the need for the exemption.

In a report published last week, the IMF acknowledged that this controversial rule "did not prove reliable in mitigating contagion" and posed "substantial" costs and risks for the IMF and member countries.

In addition, it could encourage creditors to over-lend to a country on easier terms because they believe the country would likely receive a public bailout in a crisis, it said.

The measure had stirred criticism, notably from some emerging-market countries that saw it as giving favourable treatment to European states, but it was also under fire from US Republican lawmakers who called for its end.

The new rules drop that exemption and focus on a "gray" zone in which a country's debt has not been deemed sustainable with "high probability", one of the IMF's core lending rules, and restructuring of its sovereign debt is considered too risky.

In this case, the IMF can offer financing on the condition that the country receives in parallel, from public or private creditors, sufficient funds to allow it to return to debt sustainability and ensure the crisis lender will be repaid.

The new policy does not "automatically presume" a restructuring of sovereign debt at the outset of aid when debt is in the gray zone.

If the country loses access to financial markets, a "reprofiling" of debt would typically be appropriate and would give the country more breathing room in adjusting to conditions of the IMF loan.

In cases where debt restructuring would be too risky for financial stability, the IMF could lend under the condition that other public creditors ease their conditions for repayment.

This last measure reflects the current negotiations on the European Union's (EU) third bailout for Greece, under which the IMF will only participate financially if the Europeans ease Greece's debt burden.

Some member states of the 28-nation EU have rejected that option, arguing that European treaties prevent them from erasing debt.

Separately, the IMF warned Europe of the economic challenge of the refugee crisis and urged it to work harder to assimilate migrants.

"The tide of refugees is presenting major challenges to the absorptive capacity of EU labour markets and testing political systems," the IMF said in its updated global economic outlook.

"Policy actions to support the integration of migrants into the labour force are critical to allay concerns about social exclusion and long-term fiscal costs," it added. Such efforts could "unlock the potential long-term economic benefits of the refugee inflow”.

TOKYO — The Bank of Japan (BoJ) unexpectedly cut a benchmark interest rate below zero on Friday, stunning investors with another bold move to stimulate the economy as volatile markets and slowing global growth threaten its efforts to overcome deflation.

Global equities jumped, the yen tumbled and sovereign bonds rallied after the BoJ said it would charge for a portion of bank reserves parked with the institution, an aggressive policy pioneered by the European Central Bank (ECB).

"What's important is to show people that the BoJ is strongly committed to achieving 2 per cent inflation and that it will do whatever it takes to achieve it," BoJ Governor Haruhiko Kuroda told a news conference after the decision.

In adopting negative interest rates, Japan is reaching for a new weapon in its long battle against deflation, which since the 1990s have discouraged consumers from buying big because they expect prices to fall further. Deflation is seen as the root of two decades of economic malaise.

Kuroda said the world's third-biggest economy was recovering moderately and the underlying price trend was rising steadily.

"But there's a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people's deflationary mindset," he added.

"The BoJ decided to adopt negative interest rates... to forestall such risks from materialising," Kuroda continued.

The governor said as recently as last week he was not thinking of adopting a negative interest rate policy for now, telling parliament that further easing would likely take the form of an expansion of its massive asset-buying programme.

But, with consumer inflation just 0.1 per cent in the year to December despite three years of aggressive money-printing, the BoJ's policy board decided in a narrow 5-4 vote to charge a 0.1 per cent interest on a portion of current account deposits that financial institutions hold with it.

The central bank said in a statement announcing the decision it would cut interest rates further into negative territory if necessary, in its battle against deflation.

"Kuroda had been saying that he didn't think something like this would help so it is a bit surprising and it's clear the market has been surprised by it," said Nicholas Smith, a strategist at CLSA based in Tokyo.

Some economists doubted the BoJ move would prove effective.

"It has gone on the defensive," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. "It made this decision not because it's effective, but because markets are collapsing and it feels it has no other option."

Going negative

Several European central banks have cut key rates below zero, and the ECB became the first major central bank to do so in June 2014.

In pursuing the same path, the BoJ is hoping banks will step up lending to support activity in the real economy, rather than pay a penalty to deposit excess cash at the central bank.

There is little sign of any pent-up demand from Japanese banks or cash-rich companies for fresh funds, however, and any money released into the system may merely be hoarded or steered into speculative activity.

"This is an aggressive all-stick-no-carrot approach to spurring investment," indicated Martin King, co-managing director at Tyton Capital Advisors in Tokyo.

The BoJ maintained its pledge to expand base money at an annual pace of 80 trillion yen ($675 billion) via aggressive purchases of Japanese government bonds (JGBs) and risky assets conducted under its quantitative and qualitative easing (QQE) programme.

The BoJ's move, boosting the dollar by 1.7 per cent against the yen, could make it even harder for the US Federal Reserve to raise interest rates four times this year, as originally envisaged by its policy board.

‘Regime change’

Markets have been split on whether Japan's central bank would ease policy as slumping oil costs and soft consumer spending have ground inflation to a halt, knocking price growth further away from the BoJ's ambitious 2 per cent target.

This is the fourth time the BoJ has pushed back its time frame for hitting its inflation target, from an initial goal of around March 2015.

Friday's surprise interest rate decision came in the wake of data that showed household spending and output slumped in December, underscoring the fragile nature of Japan's recovery.

Many analysts had already been suggesting that the BoJ had little scope left to expand its asset-buying programme.

"I think this is a regime change and the BoJ's main policy tool is now negative interest rates," said Daiju Aoki, an economist at UBS Securities in Tokyo. "This shows that the ability to buy more JGBs is limited."

Kuroda noted that the BoJ was not running out of policy ammunition.

"Today's steps don't mean that we've reached limits to our JGB buying," he said. "We added interest rates as a new easing tool to our existing QQE framework."

AMMAN — Arab Bank announced in a press statement on Saturday that net operating income at the end of 2015 amounted to $1.1 billion. 

According to the statement, net income after tax and provisions stood at $442 million compared to $557 million in 2014 after taking into account $349 million as legal provisions.

"This follows a settlement agreement which was entered into without any admission of wrongdoing and upon terms satisfactory to the bank with respect to the legal case which was filed against the bank in New York 11 years ago," the statement said.

"The bank has been setting aside provisions for the case during the past several years which at the end of 2015 stood at $1 billion and which will cover the expected obligations under the settlement agreement," it added.

Aside of this allocation, the underlying performance of the bank was strong in 2015. 

Excluding the effect of foreign currency devaluations, loans and advances rose  by 3 per cent to $23.8 billion and customer deposits grew by 3 per cent to $35.2 billion. 

Total group equity was given at 48 billion and capital adequacy ratio was at a healthy level of 14.2 per cent. Liquidity continues to be high with a loan to deposit ratio of 67.6 per cent.

Chairman Sabih Masri attributed the strong underlying performance of the bank to the success it has had in growing its business across different markets while at the same time managing risks very effectively. 

"Arab Bank succeeded in growing its operating profit by taking advantage of the broad diversification of its business in Jordan and across the region," he said in the statement.

Chief Executive Officer Nemeh Sabbagh stated that the bank succeeded in growing its revenues and in controlling its expenses which allowed it to achieve a healthy cost-income ratio of 42.3 per cent. 

He indicated that the bank’s loan portfolio continues to be healthy with the ratio of non-performing loans to gross loans improving to 4.8 per cent despite the challenging conditions in the region. 

"Credit provisions held against non-performing loans stood at a comfortable 109 per cent, excluding the value of collaterals held," he said.

Masri expressed his full confidence in the bank’s ability to maintain its leading position regionally and to continue achieving its targeted objectives.

In light of this strong performance, the board of directors is recommending the payment of cash dividends at a rate of 25 per cent.

The bank’s results are subject to the final approval of the Central Bank of Jordan.

KUWAIT CITY — Kuwait, a member of the Organisation of Petroleum Exporting Countries (OPEC), projected a record budget deficit for the fiscal year starting April 1 on the sliding price of oil, the finance ministry said on Thursday.

The shortfall for the 2016-17 fiscal year is estimated at 11.5 billion dinars ($38 billion) or a massive 30 per cent of gross domestic product (GDP) due to a sharp decline in oil revenues, the ministry indicated on its Twitter account. 

Spending was estimated at 18.9 billion dinars, just 1.6 per cent lower than in the current year, the ministry added.

Revenues were projected at 7.4 billion dinars ($24.4 billion) of which oil income was estimated at $19.1 billion or just 78 per cent of the public revenues.

In the past, income from oil contributed more than 94 per cent of revenues in the Gulf emirate, before the decline in crude prices.

The budget was approved at a joint meeting of the Cabinet and the supreme planning council on Wednesday night.

The oil income estimate for 2016-17 is 46 per cent lower than in the current year, and 74 per cent below the actual oil revenues in 2014-15, the ministry elaborated.

The oil revenues are calculated on the basis of a crude price of $25 a barrel, down from the current year's $45 a barrel.

The price of Kuwaiti oil dived to as low as $19 a barrel last week. Currently it is hovering around $23 a barrel.

Kuwait has projected a shortfall of $23 billion in the current fiscal year, the first deficit after 16 years of surplus.

The Gulf state, which has a native population of just 1.3 million, has built around $600 billion in fiscal reserves in those years.

Figures posted on the finance ministry website show that actual income earned in the first three quarters of 2015/2016 fiscal year amounted to $37.6 billion, or 46.2 per cent lower than last year.

The Gulf state posted a provisional deficit of $8 billion in the first nine months. The shortfall normally swells in the last quarter due to accounting adjustments.

All the Gulf Cooperation Council (GCC) states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates — have posted deficits after oil prices lost three quarters of their value since mid-2014.

The Gulf states have announced a series of austerity measures that included raising the prices of fuel products, electricity, water and others.

Kuwait has liberalised the price of diesel and kerosene and is considering cutting subsidies on other services.

But it is facing difficulties to cut spending which has increased more than four folds since 2006, mostly on wages and subsidies, according to official figures.

The wage bill in the new budget is estimated at $34 billion or 55 per cent of total spending while subsidies account for 15 per cent.