Oil Price Crash: Saudis Told to Embrace Austerity as Debt Defaults Loom
- Oil Price Crash: Saudis Told to Embrace Austerity as Debt Defaults Loom
by Mehreen Khan, http://www.telegraph.co.uk/
Kingdom faces a future of higher taxes and low fuel subsidies amid fears the world’s weakest oil producers will soon begin to buckle
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Saudi Arabia faces years of tough austerity as the worst oil price crash in the modern history forces the kingdom to make radical cuts to government largesse, the International Monetary Fund has warned.
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The world’s largest producer of crude oil will need to “transform” its economy away from oil revenues, which make up more than 80pc of the government’s wealth, according to Masood Ahmed, head of the Middle East department at the IMF.
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The Saudi monarchy has already been forced to unveil the largest programme of government austerity in decades as oil prices have collapsed by more than 70pc in 18 months. “This will have to be part of a multi-year adjustment process,” Mr Ahmed told The Telegraph. He urged the kingdom to reform its generous system of oil subsidies and introduce a host of new taxes, including consumption levies such as VAT.
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“There will have to be a major transformation of the Saudi economy. It is necessary and it is going to be difficult, but it is a challenge which I think the authorities have clearly laid out”, said Mr Ahmed.
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Saudi is intentionally damaging the world economies. They could cut their production by just 10% and push the oil price to at least twice the curent prices but choose not to do so. The only explanation for that is that they are either very stupid (unlikely) or very smart and hope to bankrupt as many oil producers as they can and then increase oil prices to $200/bl. The hedge funds shorting the oil market is helping them achieve their goal.