Opinions get around recently over a piece of news that the King of Saudi Arabia urged its government to watch budget and prepare for “stringent days” ahead. The topic is common, though the story is impressive that a renowned “tycoon” country goes as far as to address fiscal difficulty by banning government officials from purchasing cars and furniture.
　　
Saudi Arabia is obviously not as poor as that, but it indeed faced considerable fiscal difficulty in recent years. The fall of oil price is the primary cause. As the oil price fell to under $50 a barrel for the last two years, Saudi Arabia that gets 90% of its budget revenue from crude oil will see its budget shortfall, 20% of its GDP this year be compensated for by foreign reserves. The foreign reserves of Saudi Arabia has dropped to $672 billion by May 2015 from $7370 billion in August 2014, and will further fall by $12 billion per month at the present oil price.
　　
The huge amount of fiscal deficit would not be covered by cutting government expenditure only. Believably, short of quick and sustainable rise of international oil price if not further fall of it, the possible cut of fiscal expenditure would only set off larger readjustment of domestic and foreign policies. The future oil price due on December 2020 at New York Commodity Exchange trades at $62.05/barrel at present, if proved durable, will find Saudi Arabia in a sustainable predicament if not crisis. And if the fiscal difficulty is not alleviated in a short term, but gets worsened, its Middle East policies will be affected and so will be its influence over the region. 
　　
For example, Saudi Arabia is at most a regional power, but its military expenditure was as high as $80.8 billion in 2014, the third largest of the world. It is unimaginable that Saudi will keep the expenditure as high if its fiscal crunch has not substantially improved. Additionally, in the wake of Syrian crisis, Saudi Arabia had provided the Syrian oppositions with a great deal of monetary aid and military armaments, of which $100 million aid was provided in full to Syria National Alliance alone. Now, the Syrian situation is even graver and the overture of civil war will possibly go reverse especially in the wake of Russian intervention. If Saudi wants to keep on its support on the Syrian opposition, it must increase its put-in, which will undoubtedly aggravate its fiscal difficulty. Since part of actions of the United States in the Middle East is usually paid by Saudi Arabia, the Saudi money shortage is not a good news to Washington.

More notably, since Saudi-led coalition of 10 countries launched warfairs against Yemen in March, Saudi military expenditure soared without reaching expected result, which left Saudi in hesitation. Will Saudi do as big as that again as its budget revenue is continually shrinking?

It is reported presently that Saudi could not help but to raise oil price by cutting production. However, it is hard for Saudi to revert the situation by itself alone given the weak demand and oversupply in international market of crude oil. On the other hand, Saudi’s willingness, if possible, to cooperate with Russia and other oil producers on raising oil price will only indicate that Saudi should water down and shelf its difference with those countries on Syria or on Iran’s nuclear issue. In sum, all is in its outset and we shall wait and see for its follow-up.

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