IMF Says Saudi Arabia Could Be Bankrupt By 2020

“They’re still hooked on oil,” noted one analyst. Another warned: “It remains to be seen if they are doing enough to deal with the current economic reality facing the country.”
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    (Photo: Saudi Press Agency)

    (Photo: Saudi Press Agency)

    RIYADH, Saudi Arabia — According to the International Monetary Fund, Saudi Arabia’s economy is in danger of collapse as oil prices grow increasingly unstable.

    The warning appeared in the “Regional Economic Outlook” for the Middle East and Central Asia published on Oct. 15, an annual report published by IMF economists. Adam Leyland, writing on Oct. 23 for The Independent, explained the grim prognosis for Saudi’s economy, which is almost completely dependent on fossil fuels:

    “[T]he IMF said that the kingdom will suffer a negative 21.6 per cent ‘General Government Overall Fiscal Balance’ in 2015 and a 19.4 per cent negative balance in 2016, a massive increase from only -3.4 per cent in 2014.

    Saudi Arabia currently has $654.5 billion in foreign reserves, but the cash is disappearing quickly.

    The Saudi Arabian Monetary Agency has withdrawn $70 billion in funds managed by overseas financial institutions, and has lost almost $73 billion since oil prices slumped, according to Al-Jazeera. Saudi Arabia generates 90 per cent of its income from oil.”

    If the trend continues unchecked, the IMF believes Saudi Arabia, once one of the most powerful economies in the world, will be bankrupt by 2020.

    With oil prices dropping, Saudi officials are aware that drastic measures are necessary. However, according to an investigation published Wednesday from Maria Gallucci, an energy reporter for International Business Times, economic analysts are questioning whether they’ll be able to follow through on those plans,:

    “It’s a strategy the Saudi government has tried to adopt for decades, mostly without success. Early development plans called for boosting sectors such as mining, petrochemicals, tourism and financial services. …

    ‘They’re still hooked on oil,’ said David Ottoway, a Middle East fellow at the Wilson Center in Washington. He added that government plans often gain steam when crude prices drop, but ‘as soon as oil prices go back up, they relax.’”

    Gallucci added that this is just the latest of several Saudi attempts to diversify the economy:

    “In 1970, the government issued its first five-year development plan, which called for diversifying ‘sources of national income and reducing dependence on oil by increasing the share of other productive sectors in [gross domestic product].’ In nine subsequent plans, the government restated its mission to expand other sectors of the economy and shrink oil’s share of revenue.”

    Katy Barnato, a reporter for CNBC, noted Wednesday that the Saudi populace, which is accustomed to one of the highest standards of living in the world, is growing increasingly restive under new economic restrictions:

    “The ultra-hardline regime in Saudi Arabia launched an austerity budget late last year to help combat a ballooning deficit. It is even considering listing shares in its ginormous state-owned oil company, Saudi Aramco, in a bid to raise funds.”

    Barnato quoted Alberto Gallo, a global economic analyst, from a January research note:

    “With a decline in social spending and a reduction in subsidies comes the risk of rising domestic turmoil, as highlighted by the Arab Spring in 2011 when high inflation, lower growth and inequality resulted in mass demonstrations across the Middle East.”

    Even Gary Ashton, an oil and gas financial consultant, writing in November for Investopedia, a Canadian investment education site, sounded a warning while putting a hopeful spin on the country’s efforts at recovery:

    “Saudi Arabia is doing what it can to get its fiscal house in order, but it remains to be seen if they are doing enough to deal with the current economic reality facing the country.”

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    • Evidentialist

      Good, let them die in the sand.

      • dd

        people like who are hated should die

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    • Petar Kuz

      Hope the Mohammedan head choppers collapse sooner then latter, – but before they do collapse face down in the Arab sand , hope Iranians or even better Russians drop the few dozens of heavy nukes on those Mohammedan head choppers ,- it would be end of Islamic terrorizm around the world – instantly , the Man kind would have a chance to live in a pice then,

      • ricksantos01

        Saudi Arabia is not enough, Nuke the Middle East and Pakistan/Bangladesh for Good Measure…. Lots of these Muzzie terrorists are Inbred Pakis/Banglas….

    • Freethinker

      They’ll just have to up the entrance fees to worship the “holy” meteor in Mecca.

    • dennis powell

      The saudis are on a path to destruction. My hope is that they don’t take us all down with them. Their policies seem driven by some irrational hatred then sound business. It makes no sense. 10m barrels a day at $40 is the same as 9m barrels at $45 and that still puts pressure on all the producers that they are supposedly trying to hurt. Their policy is driven by some kind of irrational thinking. The day of big oil is slowly going away and this is certainly not the way to maximize the years they have left. Why does market share matter to them it should only be about maximizing revenues. The competitors may be pushed aside for a short time but buyers will not stay loyal to them , they will follow the best price. I can only imagine that our allies will love buying their oil from us instead of terrorists and that is what they have become.

      • Mike Glen

        Nicely put Dennis, but add to the equation that Saudi Arabians live the high life, Expensive Cars lavish building projects ect. Deficit Spending is what will destroy both Saudi Arabia and the U.S.

    • fuda

      Insha’Allah ! I pray for the that prayer to go through then the Saudi Royals can know how normal Muslams have been viewing their excesses

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    • Adnan Fayyaz

      That is not good news for us Pakistanis. Even though the Saudis keep treating us like dog excreta, we Pakistanis always took it with a smile. Anyways, the point is we will lose a lot of foreign remittances back to our homeland, that will in turn affect our economy.

      • NS

        After all we pakistanis are Saudi progeny. We must always submit to our Arab ancestors, it runs in our blood.

    • Adnan Fayyaz

      That is not good news for us Pakistanis. Even though the Saudis keep treating us like dog excreta, we Pakistanis always took it with a smile. In fact they even used to joke there that a Saudi doesn’t really need toilet paper, as they just need to get a Pakistani to happily lick it up for them. Anyways, the point is we will lose a lot of foreign remittances back to our homeland, that will in turn affect our economy.

    • Albaniann

      Where from? Where to? And Why?

      Any ignorance, however great, could be forgiven except for man to be ignorant about the secret of his existence, his aim in life and what will be his outcome after death. Some thinkers express these questions in simple words: where from? Where to? And why? Meaning: where did I come from? Where am I going? And why am I here?

      Those who only believe in the material world and who do not believe in a Creator- the atheists- only believe in sensory data. They say that this universe and everything in it came by itself. All its order is simply due to blind coincidence. They say that man is simply like an animal or a plant and that he will exist for a short period and then end like any other animal or plant.

      An Arab Poet, Elya Abu Madhi (a born-Christian), not long ago expressed his uncertainty about the purpose of life in his Arabic poem Al-Talasim, meaning “puzzles,” which I have translated into English. He says in his poem:

      I came not knowing from where, but I came.
      And I saw a pathway in front of me, so I walked.
      And I will remain walking, whether I want this or not.
      How did I come? How did I see my pathway?
      I do not know!
      Am I new or am I old in this existence?
      Am I free and unrestrained, or do I walk in chains?
      Do I lead myself in my life, or am I being led?
      I wish I know, but…
      I do not know!
      And my path, oh what is my path? Is it long or is it short?
      Am I ascending in it, or am I going down and sinking?
      Am I the one who is walking on the road,
      or is it the road that is moving?
      Or are we both standing, but it is the time that is running?
      I do not know!
      Before I became a full human, do you see
      if I were nothing, impossible? Or do you see that I was something?
      Is there an answer to this puzzle, or will it remain eternal?
      I do not know … and why do I not know??
      I do not know!

      This feeling of doubt and confusion about the presence of a Creator and whether He sent messengers and prophets to guide mankind must be quite painful because it deprives the Atheist and the Agnostic of tranquility, security and peace of mind. The unbelievers do not have credible answers to the purpose of one’s existence. And thus they say that man lives for himself and for the pleasures of this life.

      So what happens when life turns sour? What happens when one goes through hardships? It is no coincidence then that the largest number of suicides takes place among Atheists, Agnostics and people who do not know their purpose in life. Do you know which country has the largest number of suicides? It’s Japan. In the year ending March 2000, there were 33,000 suicides in Japan. That is 91 suicides per day or 1 suicide every 15 minutes! This despite Japan being the second largest economy in the world wherein people do not have to worry about providing a roof over their heads or about food or medical care.

      • Petar Kuz

        so what is the point of your writings my albanian eagle ?

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    • disqus_fl9zft2qBd

      All Islam business will go down as Saudi goes down.

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    • Avner Eliyahu Romm
    • GABAN

      oil for food…

    • Whytruthhurts

      How come that Iran is not worried about Saudi Arabia, both oil producing countries and all they have to do is to stop manipulating and undercutting each other and move on the market price. By the way is IMF financing Saudi Arabia in order to predicting its bankruptcy. The fact, is America is bankrupt as its debt exceed more than 14 trillion and not decreasing but increasing on a annual basis. Today America is there because it uses its might to invade and occupy countries that do not deal or reject US dollar as their carry trade or reserve currency and this is how US is a super power and keeping its status but how long are they going to last.

      • Lost in america

        Iran and Saudi Arabia do not control the oil market any longer. It is a buyers market with a glut of oil. They have to compete to get market share. The US is looking for markets to export its oil to as well. The US has not been part of a coalition invading since Iraq. It was a definite losing proposition. The dollar is very high relative other currencies which hinders US trade. China and Russia need to dump more dollars so that the price will decrease. Russia is invading Syria but this has only brought the ruble down further.

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    • Bill

      Who is the IMF making the kind of statement about Saudi. So you know how much gold Saudi has put underground. I personally knowthat they were at one time asking for payment in gold. The Author might be two young to see certain things OPEC and, Saudi while Aramco was functioning. SAramco did not start until the late 80s where Saudi took over managing its own Oil. The Largest Oill producing field on earth will not run out. So IMF you are talking out your hind side.

    • rabee

      The cost of oil production in Saudi Arabia in about $9.50, so if the price go’s down to $10 Saudi Arabia still survive at the same time most of other unconventional oil producers will be out of the market and you will start the market life cycle again by buying oil again from Saudi Arabia . And what about if Saudi Arabia change the currency (Petrodollar) this will make others heading south

      • dennis powell

        This isn’t about can they make more then it costs to produce. This is about can they make enough to sustain their economy. At $10 or $40 a barrel they will go bankrupt.

    • maria

      Good. Maybe then they will stop funding the construction of Wahhabi mosques throughout the world.

    • jimmie58

      Finally some good news.

    • Selam

      The Saudi culture is primitive. Women, half the population, do not work. It’s wasted man power. These idiots don’t even realize it. The funniest part is women themselves see this as privilege. Once the oil is gone, they will go back to camel herding and eating dates drink camel milk. That’s all they will be left with.

    • EVHappy

      So funny! Saudi Arabia is sitting on a massive gold mine. They can produce as much free cash as needed, if they want to. So different than most of the other countries on Earth. Japan, for example, has almost no resources to extract for cash. They have earn every penny. So, don’t worry about Saudi Arabia. Worry about most of the unconventional oil producers in the US. Half are about to go bankrupt. Then Supply / Demand fundamentals will balance the equation at a price that makes cost sense in the world.

    • m bc

      If US replaced oil as primary global fuel…we would have new industry with millions of jobs.. destroy our enemies in Russia and Arab oil states… and reduce climate change… AND save a few hundred billion in defense costs every year.

      • EVHappy

        Too bad other energy systems are far too costly to be practical. Of course we would do that, if it made sense. Renewable systems are not practical for the masses without the fossil fuel crutch. That is what your happy, green friends don’t understand.

        • George

          “…far too costly to be practical.” Also known as, “There will be very little money for the monied interests if people can use wind and solar power that God has provided for free.” This has nothing to with costs and everything to do with propping up current corporate interests.

    • m bc

      Saudi Arabia might try treating women as people instead of property… Huge human capital and dignity being thrown away to satisfy Saudi radical Islamic state religion.

      • EVHappy

        No Saudi citizen needs to work. They generate more than enough foreign currency just by selling oil from their massive reserves. They can hold out a lot longer than US unconventional oil producers. Just wait and see. Yes, I am right and you will never admit it, even when over 50% of US oil companies go bankrupt in the process. This is Capitalism, ironically. May the lowest cost producers survive.

    • James Wherry

      It’s racist to condemn oil sales to Arabs.

      What I resent is supporting any and all extremist governments. That includes Iran, Syria, Sa’ud’i Arabia and other Gulf states.

    • Stabilizer

      Since the USA doesn’t get any oil from Saudi, or anyone else in the Middle East for that matter, it won’t matter much to us, other than knock-on effects. However, this writer is nuts if he thinks Saudi will go bankrupt in 4 years. Running current deficits they are at no risk of running out of money – forever – in fact if they earn just 7% on their money, their reserves will GROW, not shrink. Jeez, where do they find reporters that don’t know math. Must be hiring Repubs.

      650 billion reserves at 7% increases $45.5 billion every year. They have a $38 billion shortfall this year. Net gain of $7.5 billion. They took out $75 billion because they are investing almost $40 billion in ventures that should return 30-40%, or another $15 billion.

      The Saudis aren’t dumb, or worried. They are investing to diversify away from selling crude oil. They are positioning KSA to sell value added products like plastics when oil prices drop, and oil when oil prices climb. Smart people.

      • EVHappy

        You don’t understand that oil is like a giant pool, sucked by the world? If Saudi Arabia doesn’t add to that pool, the price goes up for the rest. Supply / Demand. Understand now?

      • rabee

        you are right

    • Julius Caesar Augustus

      The Petrodollar is over, the King is dead, long live the King.

    • Good I hope they not only go bankrupt, I hope they all starve to death too.

    • John L

      After paying nearly $5 a gallon for diesel a few years back, I swore to never care if these aholes made another dime from oil. Can’t screw everyone year after year and then expect sympathy when the jig is up.

      • EVHappy

        Oh, you just don’t get it. Too bad it costs over $80 / barrel to produce and deliver oil from tar sands and from fracking operations.

    • ray bari

      This time the sword is getting closer to Al-Saud neck.

    • tapatio

      There’s only one appropriate response to this news………….


    • Bob Barton

      Maybe we can buy America back at a discount.

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    • James Barbera

      Very little sympathy after being gouged for years by OPEC. Let them all drink their oil.

      • EVHappy

        You will suffer, not them. They are sitting on a gold mine, just waiting to extract as much as they need, when they need it.

        • Cy Wong

          @EVhappy – you are not thinking. Who are going to work at the mine? Engineers will be from Europe who will demand high salaries and workers from India and Africa . The value added from mining may not be fantastics.

    • Dennis Kensington

      Bomb them before they get bankrupt.

      • rabee

        in your dreams MF< just Waite and see Saudi Arabia will drive all other production country's outside the Oil business soon

    • Petar Kuz

      Hope those Mohammedan head choppers disappear somewhere for ever, maybe Muhammed’s company will make them fell at home,

    • Aster

      Oil is already at 0.77c a gallon in some parts of the US. That is very good news for US consumers. After years and years of being gouched by these oil producing middle eastern countries.

      • EVHappy

        Yet, it hasn’t made the global economy jump. Think about that. We are now experiencing Global recession.

    • Aster

      Very Good. Spread of wahabism will also end. This is exactly what is needed.
      They want to build 200 mosques in Germany but are not able to take in or help the Syrian refugees.

    • DAVID

      But Iran wants to expedite this by selling oil $10.00 a barrel for 2 years.

    • Herman

      So by 2020 they will be like us …..Broke…

    • Gary713

      Tourism in Saudi Arabia? Are are you kidding? You can’t even have a beer over there. A British man was sentenced to 350 lashes for making homemade wine.

      • Isaac

        Pilgrimage tourism is very high in Saudi Arabia. They get millions of pilgrims every year. These tourists are not after beer.

      • George

        They aren’t interested in 45 year old frat boys touring their country. It is tourism for religious purposes primarily.

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