Neoliberalism in Unlikely Places
The list of Petrostates that respond to mounting deficits by cutting fuel subsidies just grew by one. One big one.
It feeling lonelier and lonelier in the death-before-reforms camp. Take it away, WSJ:
Saudi Arabia on Monday unveiled plans to cut expenditures and sharply raised domestic fuel prices as the world’s top oil exporter attempts to cope with a new era of cheap crude prices.
After years of spending its massive oil wealth to bolster the local economy and provide subsidized energy and other utilities to its 30 million people, a steep decline in oil prices has forced the kingdom to reassess these plans.
On Monday, officials said the government ran a record deficit of nearly 367 billion Saudi riyals ($98 billion) this year, or about 15% of gross domestic product, as low oil prices suppressed revenue, pushing it to cut planned spending by 14% in 2016 amid expectations that income from oil sales will remain under pressure.
Shortly after unveiling the budget for 2016, Saudi Arabia increased domestic fuel prices in a move that suggests that the government is willing to adopt some difficult measures as it deals with cheap oil.
A cut in subsidies risks a backlash in the kingdom as its citizens are accustomed to cheap energy and other utilities.
Hat tip: Agramonte.
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