New Austerity Steps to be Taken in Saudi Arabia, Amid Saudi Oil Prices War

“Saudi Arabia has asked state agencies to submit proposals for cuts of at least 20% to their budgets in a fresh austerity drive to cope with a sharp drop in oil prices,” four sources familiar with the matter said. The Foreign Ministry has already implemented a 20% cut, one of the sources said, adding that “the cuts will not impact salaries but projects could be postponed and contracts yet to be awarded could be delayed.”

The requests were made more than a week ago due to concerns about the impact of the coronavirus epidemic on crude markets, and ahead of the collapse of an oil output deal between OPEC and its allies on Friday, according to the sources.

One of the sources told Reuters that when the budget requests were sent, Saudi officials had been anticipating difficult talks with Russia over the need for deeper output curbs to stabilise markets. Moscow did reject the proposal, triggering a war for market share between the two countries which has sent crude prices plummeting.

Riyadh ratcheted up the standoff with Moscow on Tuesday by announcing it would raise its crude supply to a record high in April and appeared to reject Russian overtures for new talks.

Saudi Arabia, OPEC’s de facto leader and the world’s top oil exporter, relies heavily on crude revenues. The International Monetary Fund has said Riyadh needs oil at $80 a barrel to balance its 2020 budget, which carries a deficit of 187 billion riyals ($50 billion).

Source:  Reuters