TEMPO.CO, London - Saudi Arabia`s financial position has stabilized as a result of the increase in oil prices as well as efforts to raise non-oil revenues and trim government spending.
But the country probably needs even higher prices and revenues in the next few years to pay for its ambitious transformation programme while maintaining internal stability.
The kingdom’s foreign reserves stood at $493 billion at the end of March 2018 and have been basically stable for eight months after declining steadily for nearly three years.
The government has introduced a value-added tax and raised other fees and taxes to compensate for the decline in oil revenues during the slump and to diversify the revenue base.
Utility prices have been increased and some subsidies have been reduced to ease pressure on the budget and clean up the accounts of the state-owned oil company Saudi Aramco ahead of its planned share sale.
But the biggest contribution to the improvement in the government’s budget and the balance of payments position has come from rising oil prices.
Benchmark Brent prices have risen by about $47 a barrel, or 175 percent, since hitting a cyclical low in January 2016.
As prices have risen, the kingdom's drawdown on foreign reserves has eased and now stabilized, according to data from the Saudi Arabian Monetary Authority (“Monthly Statistical Bulletin”, SAMA, March 2018).
The rise in oil revenues has provided much-needed fiscal breathing room and the International Monetary Fund has encouraged the government to slow the pace of tax increases and spending cuts.
REUTERS