MONEY is the glue that holds Saudi Arabia together. To maintain a loyal citizenry and counter radicalism, the kingdom’s rulers pamper their subjects with lavish benefits and cushy government jobs. In times of uncertainty, such as during the Arab spring, workers are handed pay rises and bonuses. The last big payout, after the coronation of King Salman in February, cost more than most governments spend in a year.
Such largesse, along with wars in Yemen and Syria and aid to states such as Egypt, has swelled public spending. Oil-rich Saudi Arabia is used to big bills. But for the past year the kingdom has aimed to keep the price of oil low by increasing production in an effort to undermine rivals and gain market share. As the price has collapsed, so too has government revenue, some 90% of which comes from the sticky stuff. The result is a budget deficit that is expected to exceed 20% of GDP this year.
There are now creeping signs of parsimony in the once-spendthrift kingdom. Since July Saudi Arabia has borrowed some $15 billion from its citizens through local bonds, its first issuance of debt since 2007. While more borrowing is expected, the government is also...Continue reading
Source: Middle East and Africa http://ift.tt/1Ptcnit
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