Saudi Arabia to Face Cash Crunch in Future: US Analyst
TEHRAN (Tasnim) – An American political science professor said Saudi Arabia, not in the too distant future, will face a massive cash deficit.
“Saudi Arabia is running large budget deficits of 15 to 20 percent of GDP (Gross Domestic Product), and is drawing down on its currency reserves. The IMF (International Monetary Fund) estimates that the Saudis will run of cash reserves in five years, and then will go deeply into debt,” James D. Savage told the Tasnim News Agency.
Savage is a political science professor at the University of Virginia and teaches public policy in the Department of Politics and at the Frank Batten School of Leadership and Public Policy. He is an expert in government budget and fiscal policies and budget theory. He completed his undergraduate degrees in political science and psychology at the University of California, Riverside, his graduate degrees in political science, public policy, and economics at the University of California, Berkeley, and his post-doctoral fellowship at Harvard University.
Following is the full text of the interview.
Q: How long can Saudi Arabia withstand the consequences of falling oil prices?
A: Saudi Arabia is running large budget deficits of 15 to 20 percent of GDP (Gross Domestic Product), and is drawing down on its currency reserves. The IMF (International Monetary Fund) estimates that the Saudis will run of cash reserves in five years, and then will go deeply into debt.
Q: According to IMF, Iran’s gross domestic product (GDP) stood at $397 billion in 2015. Meanwhile, latest reports suggest that it will grow five percent in 2016-2017, thanks to a solid foundation built to cope with exclusion from the global financial system. Given these facts, why is not Iran a member of the G20 yet?
A: The membership of the G20 has remained the same since 1999. There are no formal requirements to be invited to be a member. Iran has probably not been invited because it was under Western sanctions. Six states can be invited to attend G20 meetings as guests. The more Iran is accepted by the West, the more likely it may be invited as a guest.
Q: Do you believe that full suspension of anti-Tehran sanctions would help promote Iran’s economic growth?
A: The suspension of sanctions should significantly assist Iran’s economic growth. It is important that Iran regain its place in the world economy. The World Bank estimates that foreign direct investment in Iran should be more than $3 billion a year. More important, $58 billion in Iranian assets held by foreign governments and banks will now be released. Iran could use this opportunity to build and diversify its economy.
Q: What might the future hold in terms of economy and prosperity for Iran now that anti-Tehran sanctions are lifted off?
A: Now that the sanctions have been eased, the world looks at Iran as a new market for its products. There is a huge demand for these products, and these imports will improve the quality of life for the Iranian people. In return, can Iran export more than just oil?