Saudi Arabia is heading for a sharp and painful reduction in its expenditures, with the financial crisis it faces under Coronavirus and the collapse of oil prices, as it faces the risk of attrition in its sovereign financial reserves, to make up for the budget deficit, caused by coronavirus and the collapse of oil prices.
According to the US Bloomberg News, the Saudi Finance Minister, in a statement on Saturday, seemed sharp in his tone, after he had made reassuring statements last week, while he had announced that his country had gone through similar crises before and overcome them, and It will also overcome this crisis he said Saturday that his country would need to take “painful” measures and deep Spending Cuts.
While Saudi Arabia announced earlier that it may borrow about 26 billion dollars more this year and will withdraw about 32 billion dollars from its reserves to finance the deficit, Al-Jadaan said on Saturday that 220 billion riyals ($ 58.7 billion) would be borrowed. An increase of 100 billion riyals (26.7 billion dollars) from what was planned before “Corona”, so the Saudi public debt would rise by 6.7 percent, to 723.5 billion riyals ($ 192.9 billion) at the end of the first quarter compared to the end of 2019. ”
Moody’s credit ratings agency notes that the collapse of oil prices due to Corona pandemic has exacerbated financial risks to Saudi Arabia, and will erode its sovereign financial reserves.
Military spending and the future of war in Yemen
Under the influence of this worst crisis in the history of Saudi Arabia and other crises, on April 9, Saudi Arabia announced a two-week truce in Yemen and extended it for a month, although the ground witnessed further escalation by Riyadh. However, observers and international research institutions believe that Saudi Arabia wanted through this announcement, to be secure from Sana’a missile attacks and aircraft attacks that will exacerbate their predicament.
As Saudi Arabia consumed huge amounts of money in the war in Yemen, whether by purchasing weapons, or buying loyalties and recruiting loyal Yemeni and non-Yemeni forces against Sana’a, however, its continuation in the war of Yemen, means more losses, while all data indicate that it lost the war.
Therefore, Saudi Arabia, according to a report of Jamestown Foundation went to reduce the funding support the allied forces from Yemeni parties, It may go after the announcement of its finance Minister to deep cuts in the spending. It may move towards a further reduction in the spending to the legitimate forces or cut off the subsidies altogether. This is what appeared to be evident in the demonstrations of soldiers whom Saudi Arabia had been hiring to fight on the frontlines, on the salaries cut off for more than 6 months, and many such on various fronts. Jamestown report, which is one of the famous American research institutions that decision makers in the United States depend on, sees that Saudi Arabia has acquire few revenues from those spent on the legitmacy forces in Yemen. Moreover, what it called the Yemeni army is not a coherent force; rather it is many factions that are often not very interested in fighting Houthis. In addition, a large percentage – up to 40 per cent – of the soldiers on the payroll are “fake soldiers”, only available to extract money from Saudi Arabia.
And since these forces live only on Saudi support, they will fade away if the support ends. According to Jamestown report, that was published a few days ago, Hadi forces will melt and fade, while the tribal and middle elites that depended on Saudi support will make deals with Houthis. It will not risk with a harmful fight with houthis, and there will not be much time until this happens.