Saudi Arabia Contemplating Wide-Ranging Cuts Under Price Pressure

Saudi Arabia Contemplating Wide-Ranging Cuts Under Price Pressure
A trader stands in front of a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh June 15, 2015. The chief executive of Saudi Arabia’s stock exchange said on Monday he expected a flurry of licenses allowing the first foreign investors to buy shares there in coming weeks. To match Interview SAUDI-STOCKEXCHANGE/ REUTERS/Faisal Al Nasser – RTX1GK2O

Bloomberg has cited anonymous but well placed sources that Saudi Arabia is working with advisers on a review of the country’s capital spending plans to save money.

They also said the Saudi regime may even delay or shrink some infrastructure projects, adding that investment spending could be reduced by as much as 10% if not more.

Investment spending was at $102b this year and the IMF expects the country to post a budget deficit this year of almost 20% of GDP thanks to pressure from declining oil prices.

Such cuts, however, will not affect salaries, the sources said. The Saudi Ministry of Finance refused to comment on IMF projections but there have been rumblings in Saudi Arabia for more deep-seated changes.

Not long after the UAE removed its fuel subsidies Samba and Central bank Governor Fahad al-Mubarak has called for a review of price subsidies in Saudi Arabia.

According to International Business Times the deficit in 2014 only amounted to 3% and local authorities and Saudi citizens have both stated that they are worried that the government was taking on long-term debts that it could not sustain.

Brent crude has dropped to a six year low, falling beneath $45 per barrel, exacerbating a stock market crisis in China and prompting analysts, OPEC officials and even Saudi Arabian businessmen to call for a cap on production and a more effective role for OPEC.

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