Saudi Arabia suffering from paralyzed economy, now among debtors

EghtesadOnline: Saudi Arabia is struggling with big financial problems and the oil-rich nation now is among the recipients of foreign loans to tackle its large budget deficit standing at 87 billion dollars.

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20 November 2016

Saudi Arabia, from 2003 to 2013 highly benefited from the rising oil prices and Riyadh managed to generate high capital assets. The Kingdom's gross domestic product grew from 400 to 800 billion dollars to improve the Middle Eastern global economic ranking from 36 to 19 and place it among the world's twenty big economies.

Presently, however, the country is among the indebted nations, as to address its financial strains, Riyadh so far has received 17.5 billion dollars in foreign loans, what remains to be unprecedented setting and a new record for the Kingdom, IRNA reported.

It goes without saying that for a country so dependent on oil revenues, any decline in the prices of the commodity is going to be felt all across the economy.

The plunging oil prices over the past two years have demonstrated that the Saudi economy, compared to other oil-producing nations, is highly vulnerable to price fluctuations in the oil market.

The economic crisis in Saudi Arabia in 2016 and especially over the past few months seems to be exacerbating triggering some reforms, on the part of the government, including reducing wages, eliminating subsidies and increasing energy prices.

But such measures, followed by government reshuffles and even the Kingdom's introduction of the Saudi Vision 2030, a plan to reduce the country's dependence on oil and rely on alternatives diverse economy, apparently have failed to help Riyadh get the ailing economy back on track.

Speculations are high that falling oil prices are not the only factor contributing to the Saudi economic problems. None of the oil-producing nations plagued in recent years by weak oil prices has faltered like Saudi Arabia which tends to be after all a religious tourist destination hosting millions of Muslim pilgrims during Hajj season, and attracting billions of dollars in tourist revenues.

Among main factors, is Riyadh's interventionist policies generating tensions across the region.

Since 2015, Saudis have waged an all-out war against Yemen, killing many civilians in the poor country and destroying its infrastructure.

The unfair war has imposed considerable costs on Riyadh, as the conflict seems to be lingering longer than expected by the Saudis.

Some estimates put the costs of Saudi onslaught on Yemen, only six months after the start of the attack, at 725 billion dollars.

In 2015, a surge in weapons purchases by Saudi Arabia, leading the attack on Yemen, helped push global arms sales up more than 10 percent , according to the consulting company IHS Inc.

The world defense market climbed to 65 billion dollars in 2015, up by 6.6 billion dollars from 2014, IHS Inc. says in its Global Defense Trade Report.

No doubt, the Kingdom needs the big volume of weapons purchased to go on with its military invasion of Yemen.

A large part of the weaponry is funneled to the Takfiri terrorists promoting Saudi interventionist goals in the region.

Too, the Saudi Kingdom is busily trying to promote Wahhabism in the region. Riyadh is putting a lot of money to propagate the extremist sect in a bid to exert its influence over the regional countries.

Yet, as the oil prices continue to come down with a gentle slope, it is not possible to envision a clear-cut economic roadmap for Saudi Arabia.

The Saudis, by following flawed economic policies, have never been able to use substantial oil revenues to develop the country's infrastructure and human resources.