Saudi Arabia Reducing Its Debt Burden, But Is It Sustainable?

CEIC Macro Watch: Saudi Arabia has successfully been reducing its public debt burden owing to rising oil prices throughout the past three years.

Public debt reached USD 36 billion (6.1% of GDP) at the end of 2011, down from USD 60 billion (15.9% of GDP) two years earlier. Moreover, the International Monetary Fund estimates that the public debt-to-GDP ratio declined further in 2012 to 5.5%, and will keep declining during the next five years. Significant GDP growth is contributing to the debt-to-GDP contraction.

However, if Saudi Arabia cuts its oil production or if oil prices fall sharply in the medium term as expected by the IMF and many experts, will Saudi Arabia still be able to maintain this prosperity taking into account that oil revenues represent some 42% of GDP and 92% of budget revenues?

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By Zahraa Hesham - CEIC Analyst

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