RIYADH: Billionaire Prince Alwaleed bin Talal has lashed out at the Saudi Arabia fiscal policy after projecting the largest ever budget deficit for 2015 following the slump in oil prices.
“We have reached the danger point... after starting to withdraw from the reserves,” to meet the budget shortfall, Alwaleed said in a letter addressed to the finance minister.
Last week, the world’s biggest crude exporter announced an expansionary 2015 budget with the largest-ever deficit of $38.6 billion.
It projected spending at $229.3bn, a slight rise from last year’s estimates, and revenues at $190.7bn, sharply down from $228bn projected in 2014.
Saudi Arabia, the lead producer in the Organisation of the Petroleum Exporting Countries (Opec), also said it estimates 2014 actual budget deficit at $14.4bn as both spending and revenues far exceeded projections.
Alwaleed, a member of the Saudi Arabia ruling family and the wealthiest Arab private investor, said Riyadh should not have let spending rise above projections, especially after oil prices began to decline.
Oil income contributes about 90 per cent of public revenues in the Opec kingpin which pumps around 9.6 million barrels per day.
If the government had contained last year’s spending within projections, a surplus of at least $50bn would have been posted, the prince said.
As a result of failing to check rising spending, a total of $53bn will be withdrawn from fiscal reserves, estimated at $750bn, in just two years, he said.
Alwaleed also criticised the way Saudi Arabia reserves are invested, saying because most of them are invested in US and European bonds, they have low yields at around 2.4pc annually.
The reserves are currently managed by the Saudi Arabian Monetary Agency, or the central bank.
Alwaleed called for the creation of an independent sovereign wealth fund to invest the reserves and increase the returns to around 7-8pc.
If oil prices remain at the current level of under $60 a barrel for benchmark Brent crude, Saudi Arabia is expected to lose half of its oil revenues of $276bn posted in 2013. Oil income in 2014 was estimated at $248bn.
Published in Dawn, January 4th, 2015
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