Saudi Arabia will review its spending priorities after the oil price decline, and will consider whether to delay or accelerate some projects, the Kingdom’s Finance Minister, Mohammed Al-Jadaan, told the Financial Times in an interview published on Thursday.
Saudi Arabia needs oil prices at about $90 per barrel to balance its budget. The world’s top crude oil exporter is already running a higher-than-planned deficit, which is set to swell with the oil price dip in the second quarter.
With oil prices having crashed into the $60 a barrel range, the Kingdom will look to avoid falling again into the “trap of booms and busts,” Al-Jadaan told FT.
A “crisis provides us an opportunity to take stock and consider”, the minister added.
“Should we delay? Should we reschedule? Should we accelerate?” Al-Jadaan said.
Last week, Saudi Minister of Economy and Planning, Faisal Alibrahim, said that the Kingdom is always ready for multiple oil price scenarios.
“We have the long-term fiscal planning and medium-term frameworks that help us adjust depending on what scenario actually plays out,” Alibrahim said at the Qatar Economic Forum in Doha.
Saudi Arabia booked a hefty budget deficit for the first quarter of the year, even before oil prices plunged in April.
Saudi Arabia’s budget deficit jumped to $15.6 billion (58.7 billion Saudi riyals). That’s already more than half of the deficit the Kingdom had forecast for the full year—a deficit of $27 billion (101 billion riyals).
The second-quarter deficit will be even higher than in Q1, as oil prices have languished in the low $60s per barrel Brent since they crashed in early April.
All the deficit in the first quarter was covered by borrowing, suggesting that Saudi Arabia prefers to continue tapping debt markets to using central bank foreign currency reserves.
With oil at $60-$65 per barrel, Saudi Arabia may have to accelerate borrowings and defer planned investments in its mega initiatives such as the futuristic city of Neom, analysts say.
By Tsvetana Paraskova for Oilprice.com
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