OREANDA-NEWS. Saudi Arabia has cut budgeted government spending in 2016 by around 2.3pc below this year's budgeted expenditures, reflecting the drastic drop in the country's oil revenues as a result of lower oil prices.

King Salman bin Abdel-Aziz approved a government budget today of SR840bn ($224bn) for 2016, compared to this year's budget of SR860bn ($229bn). The spending cut, which is the first in more than 10 years, indicates that the Saudi government expects oil prices to remain at current lower levels in 2016.

Announcing the 2016 budget at a cabinet meeting today, king Salman said he has ordered "comprehensive economic, financial and structural reforms" and that the government is seeking to diversify sources of revenue.

Oil revenues make up 90pc of Saudi government revenues.

Next year's Saudi budget projects a deficit of SR326bn ($86.9bn), which is SR41bn ($10.9bn) lower than the actual SR367bn ($97bn) deficit in this year's budget. This year's overspending included bonuses and grants to Saudi citizens of around SR100bn ($26.6bn) decreed by king Salman to mark his ascension to the throne.

The 2016 budget forecasts overall revenues of SR514 ($137bn), down from actual revenues of SR608bn ($162bn) in 2015. This year's budget, when it was announced in January, had projected revenues of SR715bn ($191bn). The SR107bn ($28.5bn) shortfall in this year's expected revenues is partially attributable to lower than expected oil prices. The 2015 Saudi budget assumed an oil price of $60/bl for Brent, whereas actual Brent prices averaged $52.44/bl.