Saudi Arabia plans spending cuts to trim deficit amid virus

DUBAI, United Arab Emirates (AP) — Saudi Arabia plans to cut more than 7% in spending next year, the finance ministry said, as the region’s biggest oil producer seeks to trim a gaping budget deficit amid the coronavirus pandemic and falling oil prices.

The kingdom expects its deficit to hit $79.4 billion this year, according to a government budget statement released late Tuesday, an estimated 12% of the country’s gross domestic product. By slashing spending to $264 billion next year, it hopes to bring its deficit down to 4.9% of the country’s economic output.

For the first time, the budget did not offer a breakdown for oil and non-oil revenue because the kingdom’s oil giant Aramco floated a sliver of its shares on the Saudi stock market last year, said Finance Minister Mohammed al-Jadaan. Disclosing revenue forecasts could shed light on the billions of dollars in dividends the state-owned company continues to pay to shareholders despite a steep fall in revenue. Almost all of the dividend money goes to the company’s majority owner, the Saudi government, to help cover state spending.

Saudi Arabia has been grappling with a budget deficit since oil prices first plunged in 2014. For years it increased public spending, drawing from robust fiscal reserves to cushion the impact of austerity measures like new taxes and subsidy cuts. With crude prices crashing to some $40 a barrel as the virus cut demand, the kingdom took more drastic measures, tripling its value-added tax to 15% and stripping allowances for state workers.

Even as coronavirus vaccine trial results have nudged oil prices up toward $50, stoking hopes of economic recovery, the kingdom’s planned 2021 budget cuts signal that petrostates in the region will still struggle to balance their budgets as prices remain depressed.

The country’s break-even...