Saudi Arabia is indeed going broke, confirms former CIA director David Petraeus.
Rumors the once-mighty oil giant is in dire financial straits continue to swirl and have heightened since the International Monetary Fund (IMF) reported the kingdom might be hit by a massive financial crisis within the next five years. Some observers even expect this economic crash to occur as early as 2020.
The main factors in Saudi Arabia's mounting financial woes are the non-stop drop in the prices of crude oil and its loss of world oil leadership production to the United States. A barrel of Brent crude is currently priced at a low $63.
The United States is now the world's top oil-producing country with an average production of 14.9 million barrels per day (thanks mostly to fracking). This production total accounts for 15.3% of the world's production.
"It's a fact that Saudi Arabia is gradually running out of money, they'd be the first to acknowledge that the sovereign wealth fund has been reduced, it's somewhere below $500 billion now," said Petraeus, who is currently chair of the KKR Global Institute.
"The (budget) deficits each year, depending on the price of Brent crude, can be anywhere from $40 to $60 billion depending on some of their activities in countries in the region."
"The bottom line is that they need the money, they need that outside investment that is crucial to delivering 'Vision 2030' which cannot be realized without outside investment, this is just one component of a number of different initiatives that they're pursuing to try to attract that outside investment," he pointed out.
Petraeus said there were "a number of different elements that will determine the success of Vision 2030." He said it's in "everyone's interests" to see the kingdom succeed and to see it carry out reforms.
He said there had been some "missteps -- some of them truly grievous, the horrific murder of (Saudi journalist Jamal) Khashoggi being foremost among those" but added that "at the end of the day, we all want Saudi Arabia to succeed, and for that to happen Vision 2030 is some element of that."
Low oil prices are having an outsize negative impact on Saudi Arabia's economy, which is still hugely reliant on oil exports. It's also left the kingdom with a persistently huge and increasing budget deficit. In 2018, the budget deficit was forecast at some $36 billion by the kingdom's Ministry of Finance. The deficit is expected to be in the same range in 2019 but will widen to $50 billion in 2020.
