Saudi Arabia Oil Reserves is the strength of their economy. They have got large number of oil reserves ranking them second after Venezuela and is the leading exporter in the world with 10,600,000 barrels per day . At one point of time these oil reserves had become the main reason for their crisis. If these things didn’t had come under control at right time, then very soon we could have witnessed next Venezuela in Middle East. Despite having large number of oil reserves, why this oil blessed nation faced financial crisis in 2018?
Geographical location of Saudi Arabia
Saudi Arabia is a sovereign Arab country in Arabian Peninsula. Riyadh is the capital city. With a land area of approximately 2,150,000 km2 (830,000 sq mi), Saudi Arabia is geographically the fifth-largest state in Asia and second-largest state in the Arab world after Algeria.
It is the only nation with both a Red Sea coast and a Persian Gulf coast and most of its terrain consists of arid desert and mountains. The state has a total population of 28.7 million, of which 20 million are Saudi nationals and 8 million are foreigners. The state’s official language is Arabic. Petroleum was discovered on 3 March 1932.
Saudi Arabia is a monarchical autocracy. It is ruled by Royal Family of Saudi. King Salman al Saud is the King and Prime minister of the country. However, he is too old to handle the office, crown prince Mohammad Bin Salman is holding the office at present. Now coming to the current topic.
It is estimated that Saudi Arabia has got 268 Billion Barrels of oil in their reserves and out of every 5 Barrel which is sold in the international market; 1 barrel of oil is from Saudi Arabia reserve.
It all started in 2014 when the prices of crude oil reduced drastically from US$112 per barrel to US$45 per barrel. Saudi Arabia’s economy is fully dependent on crude oil. Education, medical facilities, emergency services is all provided by the government at free of cost. There is no tax on any services and the payment is done by oil revenue.
In 2016, Oil producing nations lost revenue of US$360 billion. Saudi Arabia’s deficit in 2016 increased from US$48 Billion to US$140 billion. Most people in Saudi Arabia abide well paid civil services jobs as their right. 70 percent of Saudi’s employment is depend on government and has 65 percent of its population under the age of 30. Due to these facts, more than 2 million of jobs are required in future. To overcome this tension, Saudi government started sacking its employees from public sectors and they even reduced 20 percent in ministers and public servants monthly salary.
First time in their history, Saudi Arabia borrowed US$9 billion by issuing First Islamic Bond Sale in 2018. Royal Family are also one of the culprits for their country economic crisis. There are 15000 members in Royal Family whose annual expenditure is more than US$ 2 Billion which is much higher than total GDP of 30 countries. When King Salman of Saudi Arabia visited France in 2015, the total spending on tour was more than US$32 million.
Saudi Arabia is third biggest military spender in the world which spends 10 percent of its GDP in its military. To promote extremism, Saudi Arabia spends huge amount of money, due which they were almost unable to face the downfall of their economy.
Vision 2030- a new hope to vivid future
Anyhow the Saudi government did their best to fight against this downfall in 2018. Mohammad Bin Salman, crown prince of Saudi Arabia negotiated a plan of Vision 2030 in which they will change their economy from being an oil dependent economy by 2020 and transform it into competitive economy before 2030. The whole idea is based on UAE model because UAE is the only nation in Middle East that successfully transformed their economy from oil dependency to competitive economy. Only 1 percent of their GDP is dependent on oil and rest depends on tourism and manufacturing. That is why, crown prince Mohammad Bin Salman had decided to take the path of UAE model which includes tourism, trade and logistics.
They started with privatisation of their biggest oil producing firm Saudi Aramco whose net worth is more than five time of Apple’s net worth. It also holds 10 percent market share in world’s oil market. Saudi Arabia also invested a share of US$3.5 billion in Uber Company.
Since Saudi Arabia had adopted the mission of Vision 2030 and are hopeful to uplift their economy, but at one point of time this could be somewhat difficult for them. This is because Saudi Arabia is a state that has worst human rights records in the world and Women do not have equal rights to men in the kingdom.
However, there were some great news in last few years like women allowed to run businesses, drive automobiles and can travel anywhere around the country.