In the upcoming five years, Kingdom of Saudi Arabia may get short of financial assets. International Monetary Fund (IMF) issued this statement warning that if KSA continued the current path, it may face bankruptcy by 2020.
Saudi Arabia is the largest economy in the Middle East however, according to IMF, if it continued the same way, KSA may face bankruptcy.
Saudi Arabia is estimated by IMF to run a enormous 21.66 per cent budget deficit in 2015 and be 19.4 per cent over budget in 2016.
The IMF expects that regional animosity and collapsing oil prices will put a damper on gross domestic product GDP.
“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,” Director of IMF Middle East and Central Asia Department, Masood Ahmed stated after the unveiling of reports in Dubai.
Experts, noted by the report, believe that oil prices are anticipated to stay at current low levels for a long term.
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 maintained.
KSA has not confronted a budget deficit since 2009. At the moment too, it has cut spending and postponed projects, although the steps taken look insufficient and had to sell state bonds that worth 15 billion dollars.
“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 added.
Saudi Arabia is causing problems for its own as it is a significant and largest member of The Organization of the Petroleum Exporting Countries (OPEC), its exclusion to the far cut production is damaging OPEC and non-OPEC oil-manufacturers. As the real connotation might be to cause some other oil manufacturers with comparatively higher costs and fewer supply to shutter, meanwhile the policy is blatantly to maintain market share.
After a year of facing the economic results of the oil price decline, OPEC is now on the edge of retard growth in United States (US) crude output. The nation’s manufacturing is almost down back to the level excited in November 2014, when the OPEC diverted its approach to focus on beat competitors and reclaiming market share. As the US wilts, demand for OPEC’s oil will grow in 2015, concluding two years of withdrawal, the International Energy Agency evaluates.
Whatever the cause is, the country would have to further fasten its belt tighter if it wishes to manage this policy.