Oil Reliance Policy Dragging Saudi Arabia to the Brink of Economic Collapse

Saturday, November 21, 2015
By Paul Martin


The ill-conceived policy adopted by Saudi Arabia to lower oil prices and provide the country with a global monopoly has put the kingdom on the brink of a financial disaster, Viktor Mikhin, a Russian expert on the Middle East, wrote in his article.

“The huge sums spent to burnish Saudi Arabia’s global image, along with feckless expenditures on the royal court, are forcing the Saudis to ponder not merely belt-tightening but the imminent collapse of their economy,” the article wrote for New Eastern Outlook read.

According to the International Monetary Fund (IMF), Saudi Arabia will run out of its reserves within five years if oil prices stay around $50 per barrel. This year, the country is expected to face a deficit of 20 percent of GDP.

Saudi Arabia cannot balance its budget if oil price is below $106 a barrel, according to IMF analysts.

In July, Riyadh began to spend its reserves. In one year from August 2014, they dropped from $740 billion to $645.5 billion. Recently, Saudi Arabia has entered the international bond market, and its first bonds were purchased by Saudi banks.

“However, the bond yield is not helping the kingdom maintain its high level of government spending. In September, Barclays predicted that if the oil price holds at $50, the Saudis’ gold reserves will last until 2019 if spending continues at the current pace,” the author wrote.

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