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News > World

IMF Warns Saudi Arabia May Go Broke in 5 Years

  •  About 90 percent of Saudi Arabia's economy is from oil revenues.

    About 90 percent of Saudi Arabia's economy is from oil revenues. | Photo: Reuters

Published 22 October 2015
Opinion

The fall in the global price of oil has hurt the U.S.-backed kingdom more than any other country.

As a result of the drop in global oil prices, Saudi Arabia may run out of assets in just five years if it maintains its current policies and keeps devoting its resources to war, according to a new report by the International Monetary Fund (IMF).

The report says that countries in the Gulf Cooperation Council (GCC) are split evenly between those with “relatively large buffers (financial assets)” that should last more than 20 years, like Kuwait, Qatar and the United Arab Emirates, and “countries with relatively smaller buffers,” like Bahrain, Oman, and Saudi Arabia, that could run out of assets in less than five years.

"For the region’s oil exporters, the fall in prices has led to large export revenue losses, amounting to a staggering US$360 billion this year alone," Masood Ahmed, the IMF’s Middle East director, told reporters in Dubai Wednesday as he released the report.

Oil prices have been cut in half since mid-2014 and Saudi Arabia has been hit the worst. The IMF estimates kingdom will post a budget deficit of more than 20 percent of gross domestic product in 2015, amounting to between US$100 billion to US$150 billion.

Saudi Arabia is the biggest producer of oil in the world and has repeatedly refused to cut back on production to increase prices despite calls by several other oil-producing nations.

Global production currently exceeds demand.

RELATED: 10 Reasons to Oppose the Saudi Monarchy

As a result of the decline in revenues, Riyadh has been forced to cut back government spending — though not, as of yet, spending on its armed forces.

Saudi Arabia is currently involved in two military operations in the region. The kingdom is part of both the U.S.-led coalition against the Islamic State group in Iraq and Syria, which began airstrikes in 2014, as well as a war in neighboring Yemen against Houthi rebels. The operation in Yemen, which began in late March, appears to have no end in sight.

Reuters has estimated that Saudi Arabia spends US$175 million per month on bombs and US$500 million on ground forces in Yemen.

As a sign of its struggling economy, over the past few months the Saudi Arabian Monetary Agency has withdrawn US$70 billion in funds managed by overseas financial institutions. Al Jazeera reported that the nation's foreign reserves have fallen by almost US$73 billion since oil prices slumped, leaving it with US$654.5 billion.

RELATED: Saudi Arabia Says Accepted 'Millions' of Syrians, Facts Disagree

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