Saudi Arabia has seen its oil income fall nearly 70% in the last five years, and has cut capital spending by about the same amount, according to a prospectus the country published earlier this week as part of a first-ever effort to sell international bonds.
The global oil price crash brought on in 2014 by Saudi Arabia’s own supply strategy has reduced the kingdom’s crude oil revenue to 334 billion riyals (US$89 billion), Bloomberg reports. As a result, capital spending is down to 75.8 billion riyals, and spending on salaries and government services is expected to fall 19% this year.
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“The cuts mean that investments in infrastructure projects will drop to less than a tenth of government spending, from about a third in 2011,” the news agency states. “The government has delayed payments to contractors and is weighing plans to cancel more than $20 billion of projects.”
Even so, government debt has grown more than six-fold, to 273.8 billion riyals as of the end of August. That’s in spite of the government’s efforts to sell domestic bonds over the last year “to fund the largest budget shortfall among the world’s 20 biggest economies.”
In recent months, Saudi Arabia has been pursuing a plan  to raise $2 trillion to fund its post-oil economy by selling shares in state-owned fossil company Saudi Aramco. That will mean transforming its Public Investment Fund, established in 1971 to direct oil revenue into domestic development projects, into a sovereign wealth fund.
Selling off 5% of Saudi Aramco “will technically make investments the main source of government revenue, not oil,” Bloomberg notes, citing an interview with Deputy Crown Prince Mohammed bin Salman in March. But “there is a long way to go. The fund had assets of 587 billion riyals as of June 30, and received more than 20 billion riyals in dividends, mostly from its holdings of Saudi Arabian equities.”