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Rashid Husain Syed is an energy analyst and consultant based in Riyadh and Toronto. For almost 25 years, he has served as vice-president of a leading Saudi trading and consulting house.

These are difficult times for Saudi Arabia. The oil kingdom could go bankrupt by 2020, according to an International Monetary Fund report that made screeching headlines a few months back.

And it's true that there is a multitude of issues that have generated serious doubts about the kingdom's present and future. Pressure is building on a host of fronts, severely taxing Riyadh in more ways than one.

Security is one of them. The kingdom had to increase its military and security spending by about $5.3-billion (U.S.) in 2015, according to Economy and Planning Minister Adel Fakieh. He attributed that figure to participation in Operation Decisive Storm, the ongoing Saudi-led coalition war on Yemen. Then there is the war in Syria to be accounted for.

There's also the Islamic State, which declared war on Saudi Arabia late last year and has claimed responsibility for a spate of recent suicide bombings in the kingdom. Related security measures went up all around, at a cost.

The timing of all this couldn't be worse, with oil prices having plummeted more than 70 per cent in 18 months. Oil's contribution to the state coffers declined from an average of 90 per cent in the past decade to 73 per cent in 2015.

According to Jadwa Investment estimates, the oil price used to calculate oil income in 2016 is $40.30 a barrel, down from $64.80 a barrel in 2015. However, the actual price of Saudi oil in 2015 averaged $49 a barrel, and where the price of oil is actually headed this year remains anyone's guess. While it flirts with the $30 mark, it's putting a significant amount of pressure on Riyadh's finances, as the world's second-largest crude producer (after Russia).

The consequences of this pressure are plainly evident. Saudi Arabia's fiscal reserves dropped to a four-year low last year, Jadwa reported, dropping to $612-billion at the end of 2015, their lowest since 2011 and down from $732-billion in 2014. Reserves could fall to about $500-billion by the end of 2016, the report added.

In 2015, the kingdom posted a record budget deficit of $98-billion. And although the budget projects an $87-billion deficit this year, it could get as bad as $107-billion, according to Jadwa.

Officials have been quoted as saying that Saudi public debt, which was about 1.6 per cent of gross domestic product (less than $12-billion) at the end of 2014, could hit 50 per cent of GDP by 2020.

In order to plug the budgetary gap, the kingdom has issued bonds worth $30-billion – its first domestic currency bonds sold since 2007. And now, dollar-denominated debt is also being planned. Despite official denials, there is speculation about letting go of the Saudi riyal's peg to the U.S. dollar.

In the meantime, Standard & Poor's has reduced Saudi Arabia's credit rating from double A-minus to single A-plus. The cost of insuring existing Saudi Arabian local currency debt against default has doubled in the past year. The International Monetary Fund has also revised Saudi GDP growth downward to a mere 1.2 per cent for 2016, its lowest since 2009. GDP grew 3.4 per cent in 2015.

Inflation is rising. Jadwa expects inflation to soar this year to 3.9 per cent, from 2.2 per cent last year. At the beginning of the year, Riyadh announced the raising of domestic fuel prices by 40 per cent. Water and electricity prices have also gone up. Plans are also in the air to raise charges on public services and institute a value-added tax on all purchases.

A leaked memo cited in the international press, dated Sept. 28, purportedly from King Salman to Finance Minister Ibrahim al-Assaf, instructs all ministries to stop new projects and stop buying cars, furniture and equipment.

New projects are on hold. Payments to contractors are getting delayed. The Finance Ministry has reportedly amended the advance payment facility for construction firms working on government projects. These companies can now receive no more than 5 per cent of the contract value as an advance, instead of the 20 per cent they were previously entitled to.

Against this backdrop, meeting expenses is becoming a challenge. Government hospitals are feeling the pinch. Budgets are under scrutiny. Patients are finding it hard to receive all the medications they used to get from government hospitals. The hospitals are even reportedly having trouble keeping stationery in stock.

This is a different Saudi Arabia. The days of the state taking care of the population from cradle to grave seems over. This could have massive ramifications for the kingdom and its people, from economics to politics. The existing social contract between the rulers and the ruled is under threat.

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