The commodity markets in Saudi Arabia are reported to have declined by a significant margin. It is a difficult situation that has hit hard Saudi Arabia’s central bank, a matter that has been directly linked to the slump in oil prices witnessed sometime back. The central bank needs to pull through the difficult time, and reports have it that it has already depleted most of its foreign assets.
It is a slippery slope for a government that has been forced to lean on holdings in its quest to cover the budget needs. The situation was seen coming, but the effects are now being felt. The government had foreseen the dire situation, but little did it know that it would reach a point of its riyals dropping in such a significant way. The COVID-19 pandemic has been blamed for the major decline in the demand for crude oil.
Time : 30-04-2020
Pivot : $16.21
Technical View : Long above $16.41
Target : $16.61, next target price is $19.31 and $20.72
Comments : Weak Bullish sentiment ahead of easing COVID-19 lockdowns
Last Price : $17.36
The government says confirmed that it is a drop of about 100 billion riyals, which translates to $27 billion. In other words, that is representative of a 5% decline from the figure recorded over the previous month. The stick pile, according to the government, now stands at a figure of about $464 billion. This has been rated as the lowest since 2011.
Government going through difficult times
The government has admitted that it witnessed a budget deficit, posting the figure standing at 34.1 billion riyals. This was something that required a quick intervention. It was at that point that the government moved ahead to look out for ways to cover the deficit. It took to both the external and domestic borrowing as a way to traverse through the hard times. The Finance Ministry data depicts all the details about that.
The take of economists
As anyone would expect, economists have indicated their perspective on the turn of events and everything that has been taking place. These economists have been quick to jump into the conclusion that that Arabia is left with no other choice other than to dig deeper into the reserves.
The country is said to have made several efforts to stabilize matters. Part of that had been the efforts to scale back its spending and also the reliance on debt. It is a historic decline in the commodity markets that have left many in a state of disbelief.
Things might be looking quite bad for Arabia, but there are also reports that the demand for gasoline in the US may be rising soon. The Covid-19 restrictions are said to have battered the demand in a great way.