With public debt rising and foreign reserves declining, the economic crisis in Saudi Arabia is heading for an escalation in the coming months.
In his report published by the British "Middle East Eye" website, the writer Mohamed Ayesh said that the Saudi Minister of Finance Muhammad Al-Jadaan recently revealed that his government will borrow 220 billion Saudi riyals this year ($ 58.6 billion).
In fact, this announcement highlights the increasing debt burden in the country and raises questions about the financial position of Riyadh, especially after the Kingdom achieved one year ago the lowest debt rates around the world.
Saudi Arabia is the largest economy in the Arab world, and the only Arab member of the Group of Twenty, in addition to being the largest oil exporter in the world.
Regional influences The
writer explained that the economic prosperity in Saudi Arabia attracted millions of Arab and foreign expats who are qualified to work for Saudi companies and public institutions, and as a result, the economic downturn in the country will affect the entire region.
In the midst of the severe global economic crisis sparked by the Corona epidemic, Saudi Arabia faced a significant drop in oil prices and the disruption of religious tourism to holy sites in Mecca and Medina, given the inability of millions of visitors to travel to the country this year to perform religious rites.
Even before the multiple crises that emerged in recent months, World Bank data revealed that the total external debt of the Kingdom of Saudi Arabia exceeds $ 183 billion at the end of 2019, compared to $ 151 billion at the end of 2018, and that this value will increase further this year.
| With public debt rising and reserve assets declining, the economic crisis in Saudi Arabia is on the way to escalation (Reuters) |
Rising Debt
The country’s total external debt has increased dramatically over the past five years. At the end of 2014, a few months before the start of the Yemen war, the total external debt was just under $ 12 billion, which indicates that this rate has increased by more than 1500 % In the past five years.
During the same five-year period, cash reserves also decreased, as reports issued by the Saudi Arabian Monetary Agency show that the country's total reserve assets were estimated at about 732 billion dollars at the end of 2014, but decreased to 499 billion dollars by the end of 2019.
These figures indicate that over the past five years, while Saudi Arabia was borrowing tens of billions of dollars from abroad, it was also withdrawing a similar amount of public reserve assets.
More importantly, all these figures go back to late 2019, before the drop in oil prices, the spread of the Corona virus and the decline in travel and global trade. Where did all that money go?
Proxy battles
While it is not clear exactly where all the funds are directed, the notable change during this period was the start of the Yemen war in March 2015, as well as other regional conflicts in Libya and Syria became proxy, attracting many Gulf parties.
On the other hand, Riyadh recently announced a massive austerity campaign that includes $ 8 billion in cuts to the ambitious reform program "Vision 2030", which was a major priority for Crown Prince Mohammed bin Salman.
The author explained that with the rise in public debt and the decline in reserve assets, the economic crisis in the Kingdom of Saudi Arabia is on the way to escalation in the coming months, especially if oil prices fail to return to the rise, and the spread of the Corona epidemic that threatens the worst economic recession since the Great Depression continues.