We just got the first significant sign that Saudi Arabia is hurting for cash
Today we got a glimpse of the country's pain: Saudi has withdrawn between $50 billion and $70 billion (£33 billion to £46 billion) over the past six months from global asset managers, according to market intelligence company Insight Discovery. The Saudi Arabian Monetary Agency's foreign reserves have slumped by nearly $73 billion (£48 billion) since oil prices more than halved, The Financial Times reports.
Oil accounts for 80% of the country's budget revenues and 45% of GDP. So when oil prices fall, it hits the economy, especially if spending remains the same. Oil has fallen from over $100 per barrel in the summer last year to $45.32 as of today.
The massive withdrawals happened because Saudi Arabia is in need of cash to sustain its own domestic economy, cut its widening deficit, and fund an ongoing military campaign in Yemen. In other words, Saudi Arabia has less money coming (from oil sales) but its spending needs remain the same.
The International Monetary Fund this month forecasted that Saudi Arabia could run a budget deficit that amounts to about 20% of GDP.
As a "swing producer," Saudi Arabia has the power to change the price of oil on its own. It is such a massive producer - 10.564 million barrels per day, as of June this year - that it can cut supply and watch the price of oil rise, if it wants. However, Saudi also wants to drive rival countries out of the oil market. The lower the price goes, the more non-Saudi oil companies go to the wall and the less oil those countries can produce. US oil production is already in decline. The endgame is that Saudi is willing to undergo short-term financial pain in order to emerge with a greater controlling share of the entire world's oil supply.
- A married couple with a 4-month-old baby were both laid off by Google, while one of them was on parental leave
- A Google employee of 11 years says he and his wife stared at each other in 'disbelief' when they realized they'd both been laid off by the company
- 6 signs that you're in a one-sided relationship and how to find balance
- Sensex, Nifty50 likely to open on a positive note amid positive global cues: Adani Enterprises, Tata Motors, Bajaj Finance among stocks in focus
- 86-year-old removes ‘retirement’ from his dictionary to become a startup founder
- Two Indian-born mathematicians US, Canada get Padma awards
- Equal-weight index: For diversified investments with low volatility
- I wish we move ahead unitedly, PM Modi extends greetings on country's 74th Republic Day