Saudi Arabia to tap cash reserves, increase debt to stem impact of price slump, pandemic: minister

Dubai — Saudi Arabia plans to draw down Riyals 120 billion ($32 billion) from its cash reserves, and increase borrowing this year by Riyals 120 billion, in attempt to stem the damage low oil prices and the coronavirus pandemic is wrecking on the economy, minister of finance Mohammed Al-Jadaan said Wednesday.

The OPEC kingpin's total borrowings this year will add up of Riyals 220 billion, since it has already raised Riyals 100 billion in loans and bonds.

Strict measures to combat deficits in the budget are in place, however the country's GDP is expected to shrink this year, Jadaan announced in a press conference that was televised online.

The country's economy has been severely hit by the pandemic and the oil price crash. Saudi Arabia's budget for 2020, announced in December, assumed an oil price of $60/b, and the country's fiscal breakeven price is $80/b, according to the International Monetary Fund (IMF). However, front-month Brent crude was priced at $20.97/b at 1730 GMT on Wednesday.

Saudi Arabia's revenue for the first quarter of 2020 will be announced in a few days, but the crises have had a limited impact on the country's revenues for the quarter due to forward sales of oil, Jadaan said.

While healthcare remains country's top priority, the authorities will evaluate the gradual return of businesses, but places will close again if the health measures require it, said Jadaan. He said the government will announce a plan regarding the this, but no date was given for this announcement.

Additionally, Crown Prince Mohammed bin Salman has formed a committee to ensure there is proper financing of the health sector, Jadaan said.

As of Wednesday, Saudi Arabia had reported more than 12,700 confirmed cases of the virus and 114 deaths.