Saudi Arabia has announced ambitious plans to end their ‘addiction’ to oil revenues this week after Prince Mohammad Bin Salman said the Kingdom would not allow their economy to be dictated by volatility in commodity markets.
Since the beginning of 2014 the price of oil has plummeted, which has greatly affected Saudi Arabia’s oil revenues. It is estimated that over 70% of the countries overall revenues come from the sale of oil. This situation has forced the young Saudi Prince into taking action, with unemployment rising and the Kingdom forced to borrow money to balance their books for the first time in over half a century.
Under the plans the Kingdom would sell off under 5% of the state owned Aramco in an IPO and turn the county into a global investment power. It is believed that the sale of even 1% of Aramco would be the largest IPO in history, due to the company’s unrivalled access to Saudi Arabia’s huge oil reserves.
The plans state that Saudi Arabia will raise its non oil revenues from $43.6 billion in 2015 to $267 billion by 2030, however their was no details of exactly how this would be achieved. Critics of the plans say that Saudi Arabia is greatly overestimating the value of Aramco and they will struggle to attract the amount of investment required to shift their dependence on oil.