Saudi Arabia expects to earn 46% more from oil revenues in 2017
compared to this year, with expectations of rising global demand
combining with the OPEC-led global production cut to push prices
higher.
In its annual budget unveiled Thursday, the kingdom said its oil
revenues were projected to hit Riyals 480 billion ($128 billion)
next year, up from Riyals 328 billion ($88 billion).
The budget did not reveal any details about Saudi Arabia's oil
production plans or targets, nor does it say what price it expects
to receive for its oil, though it cited the International Monetary
Fund's estimate of 2017 oil prices at $50.60/b. Oil prices in 2016
averaged $43/b, the budget document said.
Overall revenues for 2017, including non-oil revenues, are expected
to rise 31% from 2016 levels to Riyals 692 billion.
With the budget laying out an expenditure plan for Riyals 890
billion ($237 billion), an 8% increase over this year, this means
the kingdom will be facing a deficit of 198 billion riyals ($53
billion), down 33% from this year, as Saudi Arabia has had to tap
into its reserves to withstand the low oil price environment of the
last two years.
"The 2017 budget was prepared in light of developments in the local
and global economy, including the estimated price of oil," the
budget document states, attributing the increases in projected
revenues and expenditures to energy pricing reforms.
"As the kingdom's economy is strongly connected to oil, the decrease
in oil prices over the past two years has led to a significant
deficit in the government's budget and has impacted the kingdom's
credit rating."
Total national debt for 2016 was about Riyals 316.5 billion ($84
billion), or 12.3% of projected GDP.
FUEL PRICE HIKES UNMENTIONED
But widely expected increases in fuel prices were not outlined in
the budget.
Reports had indicated that Saudi Arabia would announce fuel price
hikes of 40% in the budget and a 20% rise in electricity tariffs,
which would have been the second increase after the kingdom made a
dramatic change in policy last year.
In its 2016 budget, it increased long-standing prices for gasoline
and domestic gas for power generation as well as ethane feedstock as
part of a broader program to cut subsidies and reduce the budget
deficit.
The price of 95 RON gasoline was raised 50% to Riyals 0.9/liter (24
cents/liter), while that of 91 RON gasoline was raised two-thirds to
Riyals 0.75/liter. Gas prices were increased to $1.25/MMBtu from 75
cents/MMBtu, and ethane, the main feedstock for petrochemicals, to
$1.75/MMBtu, more than double the long-standing fixed price of 75
cents/MMBtu.
These were all part of a gradual five-year program aimed at
structural economic reform, including fuel price hikes, to improve
energy efficiency and bring spending under control.
The 2017 budget document made reference to the reform efforts,
saying that the government would review and evaluate all subsidies,
"including adjustments for petrol products, water and electricity
support systems, and repricing over the next five years to achieve
efficient use of energy, preserve natural resources, avoid
irrational use, in addition to increasing fairness by focusing
government support on the middle or low income citizens and
establishing a competitive business sector."
--Herman Wang, herman.wang@spglobal.com
--Adal Mirza, adal.mirza@spglobal.com
--Edited by Alisdair Bowles,
alisdair.bowles@spglobal.com
© 2016 Platts, The McGraw-Hill Companies Inc. All rights reserved.
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