Saudi Arabia, the world's largest crude oil exporter, on Thursday announced a 2015 budget with record high projected spending despite the major drop in oil prices.
A statement read on state-run television said spending for 2015 is projected at 860 billion riyals ($229.3 billion) and revenues at 715 billion riyals ($190.7 billion).
Projected spending is slightly higher than the 855 billion riyals planned for this year, but revenues are 140 billion riyals lower than estimates for 2014, said the statement read after a cabinet session chaired by Crown Prince Salman bin Abdulaziz.
The budget shortfall is the first deficit projected by the OPEC kingpin since 2011 and the largest ever for the kingdom.
In the last six months, Brent crude oil has tumbled from around $115 a barrel - a level at which the kingdom was raking in giant budget surpluses - to just above $60.
But government reserves at the central bank, built up over the last four years of ultra-high oil prices, totaled 905 billion riyals in October, enough to cover deficits of the size projected in 2015 for about six years. That excludes the government's other assets and its ability to borrow.
Saudi Arabia will continue spending actively on economic development projects, social welfare and security despite the oil price slide and challenging conditions in the global economy, the ministry said.
That would be positive not only for Saudi Arabia but also for the rest of the Gulf, as Saudi money helps to drive the entire region, from the Dubai property market to Bahrain's tourism industry and Kuwaiti construction firms.
Saudi Finance Minister Ibrahim al-Assaf said this month that the budget comes during “challenging” global economic conditions but reserves built over many years have given Saudi Arabia “depth and a line of defense that come in handy in times of need.”
In royal decrees issuing the new budget, King Abdullah called for “rationalization of spending” and for the “accurate and efficient implementation of the budget.”
“You are aware of the slowdown in growth in the global economy and the events in the petroleum market that led to the sharp fall in oil prices,” the statement quoted the king as saying.
If oil prices remain at the current level of about $60 a barrel for benchmark Brent crude, Saudi Arabia is expected to lose half of its oil revenues of $276 billion posted in 2013.
No figures have yet been provided for this year's budget results.
The International Monetary Fund has warned that due to the drop in oil price, Saudi Arabia will post a budget deficit this year.
But the kingdom, which pumps around 9.6 million barrels per day, can easily tap into huge fiscal buffers, estimated at $750 billion, to meet the budget deficit.
King Abdullah authorized the finance minister to draw “from the reserves” to meet the deficit or through borrowing.
Ratings agency Standard and Poor's lowered its outlook for Saudi Arabia to stable from positive following the slide in oil prices.
But S&P also affirmed its high ratings for Riyadh over the “strong external and fiscal positions” it has built up in the past decade.
[With AFP and Reuters]