Saudis to set strategy for era of cheap oil

2016 budget expected to be released around December 21 as red ink flows

Saudi Arabia’s government is expected to announce spending cuts and a drive to raise revenue from new sources as it lays out a strategy to cope with an era of cheap oil, people familiar with Saudi policy-making said.

Markets in the world’s top oil exporter are jittery because low crude prices have pushed state finances deep into deficit and so far, the government has not revealed a detailed, comprehensive plan to stem the flow of red ink.

But in coming weeks, authorities will make their intentions clearer. The state budget for 2016 is expected to be released on or around December 21, official sources said.

In the following weeks, probably in January, the government is to reveal a multiyear economic plan that may include longer-term reforms such as cuts to energy subsidies and new taxes.

The budget will be the first drafted by the administration of King Salman, who took the throne in January, and the first carrying the imprint of his son Mohammad Bin Salman, who chairs a powerful new Council of Economic and Development Affairs that now dominates the economic policy apparatus.

So far Mohammad Bin Salman, also defence minister, has focused much of his energy

Government revenue on launching Saudi Arabia’s military intervention in Yemen. He is now expected to apply some of that willingness to take radical action to the economy.

“A strategic review of economic policy is underway in the government and officials are putting together a

Brent crude oil (RH scale) new framework for managing the economy,” said Khalid Al Sweilem, a former senior official at the central bank, now fellow at the Harvard Kennedy School’s Belfer Centre in Boston.