Saudi Arabia posts $ 29 billion deficit in Q2 due to falling oil revenues

DUBAI (Reuters) – Saudi Arabia registered a deficit of 109.2 billion riyals ($ 29.12 billion) in the second quarter of this year as low oil prices hurt revenue, a report by the Ministry of Finance released Tuesday.

FILE PHOTO: A Saudi flag flies over the Saudi Arabian consulate in Istanbul, Turkey, October 20, 2018. REUTERS / Huseyin Aldemir

The coronavirus crisis has affected the non-oil sectors of the world’s largest oil exporter this year, adding to the impact of record low prices on the economy.

Second quarter oil revenues fell 45% yoy to $ 25.5 billion. Total revenue fell 49% to nearly $ 36 billion.

Total second-quarter spending fell 17% annually to about $ 65 billion, the quarterly budget performance report showed, although spending increased compared to the first quarter by 7.5%.

“A pullback in spending is essential to contain the deficit,” said Monica Malik, chief economist at the Commercial Bank of Abu Dhabi. “The government’s proactive stance has already been reflected in the austerity measures announced in April. However, this will decrease the prospects for recovery, ”he said.

Facing a deep recession this year, Riyadh has introduced measures such as eliminating a cost-of-living allowance for state employees and tripling the value-added tax to 15% to increase state revenue.

Economists have said this could restrict recovery as brakes aimed at reducing the spread of cornavirus are removed.


The IMF has estimated that the economy could shrink by 6.8% this year, a figure Saudi officials have said was “pessimistic.”

Saudi Arabia, which registered a deficit of $ 9 billion in the first three months of 2020, has raised $ 12 billion in international markets so far this year and has borrowed 41.1 billion rials ($ 10.96 billion ) in the domestic market, the document showed.

Finance Minister Mohammed al-Jadaan said this month that the kingdom plans to turn to international debt investors at least once more this year.

In addition to borrowing, the government has used about $ 13 billion in government reserves in the second quarter to finance its deficit, budget data showed. That’s largely within a government-led $ 32 billion reduction limit this year.

However, between March and April, the kingdom used $ 40 billion in foreign reserves to support investments abroad by its sovereign wealth fund, the Public Investment Fund.

Report by Davide Barbuscia; editing by Jon Boyle, Larry King, William Maclean

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