Oil price crash: Saudis told to embrace austerity as debt defaults loom
Kingdom faces a future of higher taxes and low fuel subsidies amid fears the world's weakest oil producers will soon begin to buckle
Saudi Arabia faces years of tough austerity as the worst oil price crash in the modern history forces the kingdom to make radical cuts to government largesse, the International Monetary Fund has warned.
The world's largest producer of crude oil will need to "transform" its economy away from oil revenues, which make up more than 80pc of the government's wealth, according to Masood Ahmed, head of the Middle East department at the IMF.
The Saudi monarchy has already been forced to unveil the largest programme of government austerity in decades as oil prices have collapsed by more than 70pc in 18 months.
"This will have to be part of a multi-year adjustment process," Mr Ahmed told The Telegraph.
He urged the kingdom to reform its generous system of oil subsidies and introduce a host of new taxes, including consumption levies such as VAT.
"There will have to be a major transformation of the Saudi economy. It is necessary and it is going to be difficult, but it is a challenge which I think the authorities have clearly laid out", said Mr Ahmed.
The warning comes as the world's weakest oil producing nations could buckle under the pressure of the price rout.
IMF officials have been in Azerbaijan this week amid fears Baku will need a $4bn international rescue package to stave off a debt default.
During the world's last major oil price crash in 1986, 17 out of 25 of the developing world's major oil producers defaulted on their debts, according to research from Oxford Economics. Debt mountains in producer nations ballooned by 40pc of GDP on average....MORE