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Saudi Arabia’s declared intention to dip into the domestic debt market for the remaining months of 2015 highlights the kingdom’s need to tap new sources of funding for its rising budget deficit, as the Brent oil price crashed to below $50/B in August, the lowest in more than six years.
The continuing rise in Saudi expenditure growth “would result in a very large fiscal deficit this year and over the medium term, eroding the fiscal buffers built over the past decade,” the IMF warned this week following its Article IV consultation with Saudi Arabia.
This development prompted the IMF to call for “a gradual, but sizeable multi-year fiscal adjustment based on a mix of expenditure and revenue measures.” In particular the IMF says that these measures should include comprehensive energy price reforms, strict control of the public sector wage bill, greater efficiency in public sector investment, and an expansion on non-oil revenues including the introduction of value added tax and a land tax. (CONTINUED - 916 WORDS)