IMF: Saudi going bankrupt in 5 years

[monitor]

Very scary what will happened to our 2millio n worker

 

[Sky lord]

KSA is extremely well-positioned to take advantage of future sources of alternative energy such as solar and wind. No further explanation is needed to why that is the case. Same with shale.

Anyway for all the talk about alternative energy sources etc. oil and gas is there to stay for the forceable future. Especially for the emerging economies which are getting bigger and richer all the time as the populations and thus middle classes in those country become stronger.

In any case KSA is very well positioned. KSA/GCC has 3 trillion dollars of assets just when it comes to sovereign wealth funds not to mention the numerous other investments. Or being the biggest "surplus-nation" on the planet. What is more important, the non-oil/gas sectors in KSA are constantly growing even despite obstacles such as the lack of privatization and legal stumble blocks.

Not to mention some unfavorable rules for business or the complete lack of TAXATION. Can you imagine any ordinary Western state with KSA's population not apply taxation to its 30 million or so citizens. Unthinkable. Of course that will one day end too in KSA and other GCC states as it is not economically foreseeable. Let alone the diversification. So for all I care, let the oil prices remain on this level for 1-2 years. This should force necessary reforms to occur quicker and eventually this will benefit KSA, GCC and other oil/gas producing countries if they can use the situation to their advantage.

just a few additions:
Saudi leadership has managed its past windfall profits very well. (Esp. If you compare with countires like Nigeria or Venezuela)
There is not going to be any more windfall profits from oil. The price will go up but never back to the dizzy heights we saw in the past, the cap on prices will be whatever value makes shale profitable.
You will have to do reforms, including societal, they will be painful
You will not be able to afford to employee every national in government jobs, women will join the work force in greater numbers, your population is increasing very fast, culture is being pushed, it will not be easy.
Saudi youth are well educated including women but mostly in management and finance related fields, not enough in hard sciences and technology. Those that go abroad for education tend to return to Saudi immediately. They do not have the work experience that kids from Asia have. This will mean that you still depend on foreigners.

I don't think it will be as painless as a "few easy reforms".

 

[Full Moon]

The amount of both ignorance and jealousy here is astonishing.

 

[black-hawk_101]

Saudis Risk Draining Financial Assets in 5 Years, IMF Says - Bloomberg Business

Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices.

The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said.

Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain.

But the IMF said measures being considered by oil exporters “are likely to be inadequate to achieve the needed medium-term fiscal consolidation," the IMF said. “Under current policies, countries would run out of buffers in less than five years because of large fiscal deficits."

Reserve Accumulation

Saudi Arabia accumulated hundreds of billions of dollars in the past decade to help the economy absorb the shock of falling prices. The kingdom’s debt as a percentage of gross domestic product fell to less than 2 percent in 2014, the lowest in the world.
The recent decline in the price of crude, which accounts for about 80 percent of Saudi’s revenue, is prompting the government to delay projects and sell bonds for the first time since 2007. Net foreign assets fell to the lowest level in more than two years in August, with the kingdom fighting a war in Yemen and avoiding economic policies that could trigger social or political unrest.

Budget Deficit

The IMF expects Saudi’s budget deficit to rise to more than 20 percent of gross domestic product this year after King Salman announced one-time bonuses for public-sector workers following his accession to the throne in January. The deficit is expected to be 19.4 percent in 2016.
“There have been a number of one-off spending proposals this year that have taken place, and those initiatives have added to the spending needs,” Masood Ahmed, director of the Middle East and Central Asia department at the IMF, said in an interview in Dubai.

“The budget deficit in Saudi Arabia does go down substantially as a share of GDP over the next five years but it still remains high over this period, all the more reason to identify ways in which it can be brought down further to more a manageable level," he said.

David Butter, associate fellow at Chatham House in London, said a crisis isn’t imminent.

“They have options of borrowing and then they have other options in terms of structural reform, developing some sort of effective tax policy, maybe some privatization,” he said by phone. Still, if the government doesn’t develop sustainable non-oil revenue over the next 5 to 10 years, “then of course, they’re in big trouble," he said.

The benchmark Tadawul All Share Index for stocks declined 1.7 percent at 12:35 p.m. in Riyadh, extending its drop over the past year to 25 percent. The MSCI Emerging Market Index has fallen 12 percent over the same period.

Debt Sales

The kingdom’s net foreign assets fell for a seventh month to $654.5 billion at the end of August. Saudi Arabia has raised 55 billion riyals ($14.7 billion) from debt issuance this year. The IMF expects the debt-to-GDP ratio to grow to 17 percent next year.

Saudi Arabia has led the Organization of Petroleum Exporting Countries in boosting production to defend market share even as prices plunged below $50 a barrel, abandoning its previous role of cutting output to boost prices.

Analysts have said Oman and Bahrain face greater risks than their wealthier neighbors from the decline in crude prices, with less oil to sell, thinner fiscal buffers and in Bahrain’s case, more debt.
The IMF expects Oman’s budget deficit to widen to 17.7 percent of GDP this year and 20 percent in 2016. For Bahrain, the fund expects the shortfall to stand at 14.2 percent in 2015 and 13.9 percent next year.

I hope that KSA will give Pakistan some money to buy new & used Stuff from NATO countries for its military.

 

[Full Moon]

I hope that KSA will give Pakistan some money to buy new & used Stuff from NATO countries for its military.

Agreed. Hand us some nukes whenever Iran gets one, and will hand you a blank check in return .

 

[black-hawk_101]

Agreed. Hand us some nukes whenever Iran gets one, and will hand you a blank check in return .

Most of the people have believe that KSA and other ME countries might already have nukes since 1980s being bought from China or may be Pakistan.

 

[Full Moon]

Most of the people have believe that KSA and other ME countries might already have nukes since 1980s being bought from China or may be Pakistan.

That is just a rumor which can be used against us at the right time. Pakistan won't be free to do so I guess as it will subject itself to some suicidal sanctions.

 

[black-hawk_101]

That is just a rumor which can be used against us at the right time. Pakistan won't be free to do so I guess as it will subject itself to some suicidal sanctions.

But for China you can't predict as they do work only for money and they can sell out Nukes too

 

[Shotgunner51]

Most of the people have believe that KSA and other ME countries might already have nukes since 1980s being bought from China or may be Pakistan.

Well nuke co-op between China-Pakistan-ME is a very delicate agenda, it's beyond what words can describe, you know what I mean bro. Personally I tend to believe it never exists. But it's open that China and KSA co-op on missile, and built the Royal Saudi Strategic Missile Force with DF-3 IRBM.

Royal Saudi Strategic Missile Force - Wikipedia, the free encyclopedia​

In any case KSA is very well positioned. KSA/GCC has 3 trillion dollars of assets just when it comes to sovereign wealth funds not to mention the numerous other investments. Or being the biggest "surplus-nation" on the planet. What is more important, the non-oil/gas sectors in KSA are constantly growing even despite obstacles such as the lack of privatization and legal stumble blocks.

You were right, KSA (together with GCC) have massive assets other than Forex in the SWF's, so there is adequate cushion to weather through this oil/gas price trough (measured in petrodollar). Despite the currently low price level, KSA is still one of the top surplus-nations. The challenge is cutting or more efficient use of expenditures (including defense, KSA should take back jurisdiction from western defense contractors, govt agencies) in the short run, and economic restructuring in the long run.

I believe China and KSA are working together to stabilize the markets. China has been accelerating imports of oil for quite a while, in third quarter 2015, the imports was already close to 7 million b/d, on par or overtaken the US. As more SPR facilities under the government (and MCR under state-run oil companies) are being built, the trend of increasing imports will persists.

China's Outsize Crude Imports Throw Traders For Loop
China trade surplus reaches US$163B (For 3rd Quarter 2015)​

Also as China is joining OPEC as an associate member, it's likely that KSA and China are working on new game plans.

 

[SQ8]

Saudi Arabia the state might, and that is a small chance.. go Bankrupt trying to win the oil wars. But the Saudi Family wont, they have protected their interests well.

 

[Saif al-Arab]

Well nuke co-op between China-Pakistan-ME is a very delicate agenda, it's beyond what words can describe, you know what I mean bro. Personally I tend to believe it never exists. But it's open that China and KSA co-op on missile, and built the Royal Saudi Strategic Missile Force with DF-3 IRBM.

Royal Saudi Strategic Missile Force - Wikipedia, the free encyclopedia​

You were right, KSA (together with GCC) have massive assets other than Forex in the SWF's, so there is adequate cushion to weather through this oil/gas price trough (measured in petrodollar). Despite the currently low price level, KSA is still one of the top surplus-nations. The challenge is cutting or more efficient use of expenditures (including defense which is a major item) in the short run, and economic restructuring in the long run.

I believe China and KSA are working together to stabilize the markets. China has been accelerating imports of oil for quite a while, in third quarter 2015, the imports was already close to 7 million b/d, on par or overtaken the US. As more SPR facilities are being built, the trend will persists.

China's Outsize Crude Imports Throw Traders For Loop
China trade surplus reaches US$163B (For 3rd Quarter 2015)​

Also as China is joining OPEC as an associate member, it's likely that KSA and China are working on new game plans.

Yes, let's see what will happen. What is certain is that KSA won't suffer from any bankruptcy or the GCC. It's absurd wishful thinking and makes no sense at all.

That is just a rumor which can be used against us at the right time. Pakistan won't be free to do so I guess as it will subject itself to some suicidal sanctions.

If everything goes according to the plan KSA will be able to develop nuclear weapons on its own in 1-2 decades if that will be the ambition. The problem will be whether KSA will be allowed to do such a thing. I personally doubt it in the current state of the ME.

But for sure, in the not so distant future a lot of KSA's energy will be nuclear. 20 nuclear reactors will be operating before 2030.

There is EXTENSIVE cooperation on this front with almost every nuclear relevant country on the planet. A lot of what is going on, we have no clue about.

Anyway I say screw the international society. If the Arab leaders had any balls or ambitions the Arab world could turn into a EU/NATO like organization in the near future and pursue nuclear weapons jointly and other military projects. Nobody would be able to do a thing to stop that if there was real political will. Maybe they will wake up one day. Egypt, Libya and Iraq were already close more or less on their own decades ago.

 

[Chinese-Dragon]

Anyway I say screw the international society. If the Arab leaders had any balls or ambitions the Arab world could turn into a EU/NATO like organization in the near future and pursue nuclear weapons jointly and other military projects. Nobody would be able to do a thing to stop that if there was real political will. Maybe they will wake up one day. Egypt, Libya and Iraq were already close more or less on their own decades ago.

True. In this world you can only count on your own strength.

That said, maybe Saudi already has nukes. The DF-21 that Saudi acquired are very accurate and can be used for conventional strikes. However, the DF-3 are NOT accurate enough to strike specific compounds, they were meant for strategic nuclear strikes on city-sized targets. It makes zero sense to arm DF-3 with conventional warheads, they were only meant as strategic weapons.

So, what are they armed with? Who knows.

 

[UKBengali]

True. In this world you can only count on your own strength.

That said, maybe Saudi already has nukes. The DF-21 that Saudi acquired are very accurate and can be used for conventional strikes. However, the DF-3 are NOT accurate enough to strike specific compounds, they were meant for strategic nuclear strikes on city-sized targets. It makes zero sense to arm DF-3 with conventional warheads, they were only meant as strategic weapons.

So, what are they armed with? Who knows.

Not nuclear weapons for sure.

Saudi simply does not have the capability to develop nukes now or in the past.

Maybe some kind of chemical agents were placed on the warheads bit I think more likely
just conventional explosives.

 

[Saif al-Arab]

Not nuclear weapons for sure.

Saudi simply does not have the capability to develop nukes now or in the past.

Maybe some kind of chemical agents were placed on the warheads bit I think more likely
just conventional explosives.

But it will have that capability soon if that is not the case.

 

[Shotgunner51]

True. In this world you can only count on your own strength.

That said, maybe Saudi already has nukes. The DF-21 that Saudi acquired are very accurate and can be used for conventional strikes. However, the DF-3 are NOT accurate enough to strike specific compounds, they were meant for strategic nuclear strikes on city-sized targets. It makes zero sense to arm DF-3 with conventional warheads, they were only meant as strategic weapons.

So, what are they armed with? Who knows.

KSA's defence expenditure is on par with nuclear superpower Russia, ranks 3rd (or a close 4th) largest in the world, more than UNSC P5 nuclear-armed France & UK, more than industrialized-financial powerhouses Japan, Germany & South Korea.

That's the biggest pot of money outside control of US congress, China government and Vladimir Putin. Even after western defence contractors, western government agencies have taken their lucrative slices away from it, whatever left is still big enough for something.