Saudi Arabia hit by low oil prices again

Saudi Arabia’s foreign exchange reserves fell to their lowest level in at least 4 1/2 years in June as oil prices continue to stay low and Kingdom’s military spending rises.

Net foreign assets held by the kingdom’s central bank, the Saudi Arabian Monetary Agency (Sama), dropped by $11 billion month-on-month in June to $562 million, new official data show, International Oil Daily (IOD) reported.

The June figure is the lowest in monthly data going back to December 2011, when reserves stood at $535 million, and represents a year-on-year drop of $106 billion, or 15.9 percent.

IOD with the reference to the latest data from the Stockholm International Peace Research Institute reported that Saudi Arabia’s military expenditure jumped by eight percent to a record $87.2 billion in 2015 from $80.8 billion a year earlier, making the country the third-biggest military spender globally behind only the US and China – and ahead of Russia.

Earlier the World Bank in its MENA Quarterly Economic Brief, “Whither Oil Prices?” report said that the 2014 oil price crash together with the high spending of the last several years have been draining the Saudi government’s budget.

The Bank noted that oil accounts for more than 80 percent of government revenues and with currently low oil prices, fiscal deficits are expected to surpass an estimated $118 billion in 2016 (about 16 percent of GDP) and $97 billion in 2017. International reserves are down by 20 percent, standing at $587 billion as of March 2016, according to the World Bank’s estimates.

At this rate, the Kingdom’s reserves will be wiped out in four years, the Bank said.

Oil edged higher towards $42 a barrel on Wednesday after hitting its lowest since April the previous day, supported by an industry report showing a fall in U.S. inventories and a weaker dollar, reported.

Brent crude LCOc1 was up 11 cents a barrel at $41.91 at 1121 GMT (0721 ET). It reached $41.51 on Tuesday, the lowest since April 18. U.S. crude CLc1 added 13 cents to $39.64.

Source: Trend News Agency