Prince Alwaleed bin Talal, billionaire investor and chairman of Kingdom Holding, said Saudi Arabia’s economic dependence on oil and lack of a diverse revenue stream makes the country vulnerable to oil shocks.
“We’ve been talking about diversifying Saudi Arabia’s revenue... for almost 30 years and not relying on oil,” Alwaleed, who is a nephew of King Abdullah of Saudi Arabia, said when asked by a group of hosts in an three-hour interview on his Rotana entertainment channel on Tuesday night.
“You know [President Dwight] Eisenhower said plans have no value, implementation [does],” he added. “The last [Saudi government] budget was recently announced and our dependence on oil was 92 percent. This proves that the [government’s] previous economic plans haven’t succeeded. It’s dangerous that our income is 92 percent dependent on oil revenue alone. If the price of oil decline was to decline to US$78 a barrel there will be a gap in our budget and we will either have to borrow or tap our reserves. Saudi Arabia has SAR2.5 trillion in external reserves and unfortunately the return on this is 1 to 1.5 percent. We are still a nation that depends on the oil and this is wrong and dangerous.”
Saudi Arabia has about one-fifth of the world's proven oil reserves and is the largest oil producer and exporter of total petroleum liquids in the world. The kingdom has the largest spare capacity, which it has used to help stabilise the global oil market and invest in the development of the country's infrastructure, in addition to providing financial aid to neighbouring countries. However, in a report last year, Citigroup said the kingdom could become an oil importer by 2030 if the country's oil consumption grows in line with peak power demand.
Iraq and Iran are the second and third largest producers after the kingdom in the Organisation of Petroleum Exporting Countries cartel.
The country, which has the largest economy in the Arab world, is spending more than US$500bn to expand its infrastructure. An expected budget surplus in 2013 and the government drawing down its foreign assets, which stood at around US$634.8bn at the end of November 2012, will help finance its expenditure plans in the event of any shortfall in revenues, according to Jadwa Investment.
Construction is forecast to be the fastest growing sector in 2013, according to Jadwa.
The kingdom's economy is projected to grow 4.2 percent this year, slowing from about 6 percent in 2012, according to the International Monetary Fund.
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