Friday, November 11, 2016

Saudi Arabia Budgets $26.7 Billion For Overdue Bills

Three sources, one story.
From Defense One, Oct. 31: 

Saudi Arabia: A Kingdom Coming Undone
As Riyadh embarks on a rocky journey to economic diversification, the U.S. should offer help — but not unconditionally. 
Though some find reason for optimism in Saudi Arabia’s National Transformation Plan, the roadmap to economic diversification released earlier this year, there is little realistic prospect for a smooth transition. The very push toward reform, while noble and necessary, could propel Saudi Arabia toward political instability. Recognizing this, the United States should encourage Riyadh by offering high-level coordination and technical expertise but not unconditional support even as the Kingdom struggles.

Far from “a revolution here disguised as economic reform,” as some have called it, the situation is more simply described as a series of choices, ranging from risky to dangerous, that are being forced upon the Saudi government by a lack of planning when the Kingdom was flush with cash, a social contract underwritten by welfare spending, and a foolish faith that high oil prices would persist.
Saudi Arabia is embarking on its economic transformation under two principal budgetary burdens: demographic change and collapsed oil prices.

First, the Saudi adult population will more than double in the next fifteen years, driving subsidies and other government payments to unsustainable levels....MORE
From Reuters Nov. 11:

Saudi Arabia sets aside $26.7 billion to settle delayed private sector payments: document
Saudi Arabia’s government has set aside 100 billion riyals ($26.7 billion) to pay debts that it owes to private sector companies after payment delays that have lasted months, an official document seen by Reuters shows.
To help curb a huge budget deficit caused by low oil prices, the government of the world’s largest oil exporter has slashed spending and reduced or suspended payments that it owes to construction firms, medical establishments and even some of the foreign consultants who helped to design its economic reforms.

But the payment delays have seriously damaged some companies, slowing the economy, and earlier this week the government said it would make all delayed payments by the end of this year.

Authorities have not disclosed the total size of the unpaid bills, but private analysts have estimated they may total tens of billions of dollars....MORE 

And finally the Financial Times, Nov. 10, cuts directly to the chase:

...Wood Mackenzie estimates that Saudi Arabia needs an oil price of $92 a barrel to balance its budget this year — a stark indication of the challenge facing the kingdom in the current oil price environment....