Bloomberg suggested that the sharp drop in oil prices would cause some “concern” in the Kingdom, noting that Riyadh had already been forced to partially scale back some of its plans because oil prices were still well below the level the government needed to balance its budget.
The International Monetary Fund said in a report after its annual consultations with the Saudi government that oil revenues will rise to 783 billion riyals ($209 billion), representing about 26% of GDP in 2026, and revenues are expected to fall to 778 billion riyals in 2029, 4.1% less than previous estimates.
Bloomberg attached a chart to its report showing that Saudi oil revenues are expected to rise and then fall faster than previously estimated:
The International Monetary Fund believes that Saudi Arabia needs oil prices of $96 a barrel to balance its budget, which is about $20 higher than the current level of Brent crude.
Given the domestic spending of the kingdom’s sovereign wealth fund, the agency poses a key question for Riyadh: “How will the current weakness in the oil market affect its finances and production policy?”
The International Monetary Fund expects Saudi oil production to reach 9 million barrels per day this year, rising to 10.2 million barrels in 2026, and to 11 million barrels in 2029.
The agency assumed that the average price of the Kingdom’s exports would reach $82.5 per barrel in 2024, then decline to $70 by the end of the decade.
The Kingdom relies heavily on oil revenues, but has launched the economic transformation plan “Vision 2030” that aims to reduce the Saudi economy’s dependence on oil revenues.
Source: Bloomberg
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2024-09-06 17:21:38
Saudi Arabia’s Oil Revenues Under Pressure: IMF Warns of Decline
Introduction
The recent drop in oil prices has sent shockwaves across the global energy market, and Saudi Arabia, the world’s largest oil exporter, is no exception. Bloomberg has reported that the Kingdom is facing concerns over its declining oil revenues, which could have a significant impact on its economy and budget. In this article, we’ll dive deeper into the International Monetary Fund’s (IMF) estimates and explore the implications of falling oil prices on Saudi Arabia’s finances and production policy.
Declining Oil Revenues: A Cause for Concern
According to the IMF, Saudi Arabia’s oil revenues are expected to rise to 783 billion riyals ($209 billion) in 2026, representing about 26% of its GDP. However, the agency also predicts that revenues will decline to 778 billion riyals in 2029, a 4.1% decrease from previous estimates. This drop in oil revenues is attributed to the current weakness in the oil market.
IMF Report Highlights Saudi Arabia’s Budget Woes
The IMF report highlights the Kingdom’s budget woes, stating that Saudi Arabia needs oil prices of $96 a barrel to balance its budget, which is about $20 higher than the current level of Brent crude. This gap poses a significant challenge to Riyadh’s finances and raises questions about its ability to meet its fiscal obligations.
Domestic Spending and Sovereign Wealth Fund
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has been actively investing in domestic projects to diversify the economy. However, the IMF warns that the current weakness in the oil market could impact the Fund’s ability to finance these projects, leading to potential funding gaps.
Charting the Decline: IMF’s Oil Revenue Projections
[Insert Chart: Saudi oil revenues expected to rise and fall faster than previously estimated]
Production Policy Under Scrutiny
The drop in oil prices has also raised questions about Saudi Arabia’s production policy. With oil revenues expected to decline, the Kingdom may need to reassess its production levels to balance its budget. The IMF’s report raises a key question for Riyadh: “How will the current weakness in the oil market affect its finances and production policy?”
Conclusion
Saudi Arabia’s oil revenues are under pressure, and the IMF’s estimates paint a worrying picture for the Kingdom’s finances. The drop in oil prices has significant implications for Riyadh’s budget and production policy, and the Kingdom will need to take steps to address these challenges. As the global energy market continues to evolve, it remains to be seen how Saudi Arabia will adapt to these changes and maintain its position as a leading oil exporter.
Keywords: Saudi Arabia, oil revenues, IMF, oil prices, Brent crude, sovereign wealth fund, Public Investment Fund, production policy.
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