Saudi Arabia on track for IMF 2016 budget deficit forecast

Saudi Arabia is likely to reduce its budget deficit this year to the level forecast by the International Monetary Fund (IMF), as the kingdom cuts spending to counter the impact of low oil prices, a fund official announced Wednesday.

The Washington-based lender expects the shortfall to narrow to 13 percent of economic output from about 16 percent last year.

Tim Callen, the IMF Saudi mission chief, said in a phone interview that while the government’s decision to pay back arrears owed to contractors “will push up spending” in the fourth quarter. “But from what we’ve seen they’re on track.”

The IMF expects the kingdom’s austerity drive to continue in 2017.

“We have to see the pace in 2017, but the direction is pretty clear,” Callen said. The fund expects the budget shortfall to narrow to about 9.5 percent of gross domestic product next year. “We are forecasting considerably higher oil revenue next year relative to this year, but also continued expenditure restraint,” he said.

Source: Bloomberg