Own goal! Saudi Arabia braces for $39 BILLION deficit - Lines up austerity measures to balance budget

© Reuters/Enrique De La Osa

Saudi Arabia, has projected a $39 billion deficit in 2015. The impact of lower oil prices, along with the decision not to cut production, is putting pressure on the country's finances.

The figure was part of the endorsed 2015 budget, which was made public in a statement read out on state-run television on Thursday.

The estimated trade deficit will be Saudi Arabia's largest on record.

The Finance Ministry said the government will try to save some money by cutting salaries, wages, and allowances that represent around 50 percent of total budgeted expenditures." But the move could anger Saudi youth, who are already struggling to cover the costs of living in the country.

According to the International Monetary Fund (IMF), about two-thirds of the population works for the government.

The 2015 budget includes 860 billion riyals (US$229.3 billion) in spending and 715 billion riyals ($190.7 billion) in revenue. Saudi Arabia promised to cover the difference by digging into its reserves.

At the latest OPEC meeting in Vienna, Austria, the Gulf country opted not to cut the production ceiling of 30 million barrels per day, despite oil prices plunging nearly 50 percent since summer.

© AFP Photo/Yasser Al-Zayyat

Saudi oil minister Ali Al-Naimi

Saudi Arabia has also made clear that it is unwilling to cut down production, even if oil prices continue to fall further. Last week, the country's oil minister, Ali Al-Naimi, said that output would not be reduced, even if prices fall to $20 a barrel.

The decision has been interpreted by some experts as trying to weed out new players from North America, who can competitively produce shale oil only at higher crude prices. However, lower oil prices also directly hurt the economies of countries like Russia, Iran, and Venezuela.

Some economists fear that the deficit in 2015 might be even larger than projected, since Saudi Arabians have underestimated the figure in the past.

Saudi economist Abdulwahab Abu-Dahesh told AFP. he said.

According to the country's Finance Ministry, the 2014 fiscal year budget is set to post a deficit of 54 billion riyals ($14.4 billion) - the first budget shortfall since 2009.