Saudi Arabia will 'take stock of' its spending priorities following a drop in oil revenues, reports FT

The Financial Times reported that Saudi Arabia's Finance Minister Mohammed Al-Jadaan stated the kingdom will "take stock" in its spending priorities as a result of a significant drop in oil revenues.

The FT reported that Riyadh intends to maintain the current pace of its government spending despite widening deficits in the budget and current accounts, as well as increasing debt levels.

Reports last month indicated that Saudi Arabia's wealth is inextricably linked to its oil revenues, and it faces increasing pressure to increase debt or reduce spending following a drop in crude prices. This complicates plans to fund a ambitious agenda for diversifying its economy.

Jadaan said to the newspaper he was not concerned if the deficit increased to 3%, 4.5%, or "occasionally 5" of GDP, as long as the government's spending supported non-oil economic growth, which is a major target in the Kingdom's diversification plan.

Saudi Economy Minister Faisal Al-Alibrahim told a Doha forum last week that the kingdom is prepared for multiple scenarios of oil prices and budgets are based on priorities.

The FT reported that Jadaan stated Saudi Arabia aimed at avoiding the "trap" of booms-and-busts by pursuing anticyclical policies, and prioritising short term fiscal balance over growth.

Saudi Arabia is ramping up its oil refining to take advantage of the high margins and offset revenue losses due to lower crude prices.

The increased refining operations in Riyadh are a powerful tool for Riyadh to control oil price volatility, and better withstand an extended price war. (Reporting from Surbhi Misra, Bengaluru. Editing by Bernadette B. Baum, Tomasz Janowski, and Mark Porter.)

(source: Reuters)