Dubai, UAE - Strategic U.S. ally, Saudi Arabia, which is the Middle East’s largest economy, is projected to be bankrupt within the next five years if the Saudi regime maintains its current policies and expenditures, according to the International Monetary Fund (IMF).
According to the IMF’s latest region report, Saudi Arabia is expected to run a budget deficit of 21.6 percent in 2015 and 19.4 percent in 2016, with the IMF urging the Saudi government to adjust their fiscal policy.
Two of the main factors behind the grim forecast are the deepening of current regional conflicts and the depressed price of oil. With the extreme refugee crisis being precipitated by the Syrian conflict, continuing large numbers of refugees are expected to strain the ability of the region to create new fiscal opportunities.
The conflicts have given rise to large numbers of displaced people and refugees, on a scale not seen since the early 1990s, according to the report. The irony in this situation is that Saudi Arabia has been one of the largest suppliers of weapons and ammunition to the forces attempting to overthrow Syrian President Bashar Assad, thus precipitating the massive refugee crisis.
“Achieving fiscal sustainability over the medium-term will be especially challenging given the need to create jobs for the more than 10 million people anticipated to be looking for work by 2020 in the region’s oil exporting countries,” IMF Middle East and Central Asia Department Director Masood Ahmed told journalists after the report was presented in Dubai.
The report also suggests that low oil prices will remain in place for the projected future.
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“For the region’s oil exporters, the fall in prices has led to large fall in revenue, amounting to a staggering $360 billion this year alone,” Ahmed said.
According to a report by RT:
OPEC members Saudi Arabia, Iran, Iraq, Kuwait, Qatar, UAE, Algeria and Libya have all seen their revenues drop sharply as a result of a decline in oil prices.
Saudi Arabia is currently facing a budget deficit for the first time since 2009. The crude price decline has strongly influenced the kingdom’s economy since oil sales account for about 80 percent of its revenues. It has prompted the government to cut spending, delay projects and sell bonds.
The country’s net foreign assets fell by about $82 billion from January to August. The government sold state bonds worth $15 billion (55 billion riyals) this year.
The budget deficit caused project layoffs in Saudi Arabia. Companies working on infrastructure projects haven’t been paid for six months or more. Payment delays increased lately as the government wants to cut prices on contracts in order to preserve cash.
OPEC, in spite of numerous appeals to reduce output in support of raising the price of crude, has refused to take action as they attempt to maintain their own market share. Of course why would OPEC reduce production when the Saudis have continually increased production since the last quarter of 2014.
While the situation looks grim on the surface, there is another line of thinking, which suggests that crude oil prices were was intentionally tanked by Saudis. This was done in an attempt to bankrupt the burgeoning shale oil market in the United States, thus allowing the Saudis to continue to dominate the world oil market while at the same time allowing for the U.S. to gain geopolitical advantage over Russia by decimating the oil-dependent Russian economy.
The fact that Saudi Arabia has continually increased oil production, essentially lowering the price of oil, speaks to the fact that they are playing a dangerous game that may ultimately destroy the House of Saud.
Jay Syrmopoulos is an investigative journalist, free thinker, researcher, and ardent opponent of authoritarianism. He is currently a graduate student at University of Denver pursuing a masters in Global Affairs. Jay's work has been published on Ben Swann's Truth in Media, Truth-Out, AlterNet, InfoWars, MintPressNews and maany other sites. You can follow him on Twitter @sirmetropolis, on Facebook at Sir Metropolis and now on tsu