Saudi Arabia is expected to run a budget deficit of 21.6 percent in 2015 and 19.4 percent in 2016, according the IMF’s latest regional economic outlook.
The country needs to adjust spending, the IMF urged.
The IMF outlined two key factors shaping the region’s outlook. They are spreading and deepening regional conflicts and slumping oil prices.
The conflicts have given rise to large numbers of displaced people and refugees, on a scale not seen since the early 1990s, according to the report.
“Achieving fiscal sustainability over the medium-term will be especially challenging given the need to create jobs for the more than 10 million people anticipated to be looking for work by 2020 in the region’s oil exporting countries,” IMF Middle East and Central Asia Department Director Masood Ahmed told journalists after the report’s unveiling in Dubai.
According to the research, many experts suggest low oil prices will remain in place for the foreseeable future.
“For the region’s oil exporters, the fall in prices has led to large fall in revenue, amounting to a staggering $360 billion this year alone,” Masood Ahmed said.
OPEC members Saudi Arabia, Iran, Iraq, Kuwait, Qatar, UAE, Algeria and Libya have all seen their revenues drop sharply as a result of a decline in oil prices.
Saudi Arabia is currently facing a budget deficit for the first time since 2009. The crude price decline has strongly influenced the kingdom’s economy since oil sales account for about 80 percent of its revenues. It has prompted the government to cut spending, delay projects and sell bonds.
The country’s net foreign assets fell by about $82 billion from January to August. The government sold state bonds worth $15 billion (55 billion riyals) this year.
“There have been a number of one-off spending proposals this year that have taken place, and those initiatives have added to the spending needs,” Masood Ahmed said.
A man looks at central Riyadh from the Faisaliah Tower, Saudi Arabia.
The budget deficit caused project layoffs in Saudi Arabia. Companies working on infrastructure projects haven’t been paid for six months or more. Payment delays increased lately as the government wants to cut prices on contracts in order to preserve cash.
Despite the perpetual appeals to reduce output and support crude prices, OPEC has been refusing to do so as the cartel is trying to maintain its market share. However, last month the cartel signaled a possible change of stance, saying it might cut output and is ready to talk to other (non-OPEC) producers. But experts say OPEC’s statements are not important without a change of policy by its biggest crude producer Saudi Arabia.