Special to WorldTribune.com

Facing record budget shortfalls as the price of oil continues to plummet, Saudi Arabia announced it would slash its budget and issue more bonds.

According to figures released by the International Monetary Fund (IMF), the kingdom’s budget deficit will hit a staggering $130 billion (U.S.) this year. Based on the IMF’s forecast in July, the budget deficit can be as high as 20 percent of Saudi Arabia’s gross domestic product (GDP).

“We are working… to cut unnecessary expenditure,” Saudi Finance Minister Ibrahim al-Assaf told Dubai-based CNBC Arabia in Washington, where he was accompanying King Salman on a visit.

Assaf said the Saudis have relied on their large fiscal reserves to bridge the budget gap but more measures should be taken.

Most experts blame Saudi Arabia for falling oil prices as the kingdom has increased its crude output to an unprecedented level of over 10 million barrels per day.

The oil market is about to get another influx of supply as Iran emerges from international sanctions.

“The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016,” Goldman Sachs said, adding that “operational stress” could send crude prices to near $20 a barrel. “While not our base case, the potential for oil prices to fall to such levels … is becoming greater as storage continues to fill.”

Saudi Arabia has so far issued bonds worth “less than SR100 billion ($27 billion)” to help with the budget shortfall, Assaf said.

“There are some projects like the ones that have been approved some years ago and haven’t been carried out until these days – that means such projects are not currently necessary and can be delayed,” said Assaf, who added the kingdom may issue bonds, or Islamic bonds known as “sukuk” to finance some spending.

Last year, Saudi Arabia posted a budget deficit of $17.5 billion (U.S.) with Jadwa Investment firm announcing that by the end of July the government had withdrawn $82 billion of its fiscal reserves, reducing the assets to $650 billion. Jadwa added that the reserves are expected to drop to $629 billion by the end of 2015.

  Hit with record budget shortfalls, Ibrahim al-Assaf, oil prices, Saudi Arabia eyes spending cuts, WorldTribune.com