Saudis Slash Subsidies As Oil Revenue Collapses

The Saudi government unveiled its 2016 budget on 28 December, alongside a range of fuel price increases in a bid to reduce the kingdom’s reliance on expensive subsidies for fuel and electricity (see p8).

Saudi Arabia has been considering reducing the politically-sensitive subsidies for some months (MEES, 11 September 2015), and similar moves of late by Abu Dhabi, Kuwait and Bahrain have now provided the political space in which to act. The decision comes as oil prices look set to remain stubbornly low, causing Saudi Arabia to project a budget deficit for the third year in succession.

The 2016 budget is the first to be announced since King Salman acceded to the throne in January 2015. It is a marked contrast to the earliest days of his reign, when he sought to cement his popular legitimacy by granting state employees a two-month salary bonus.


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