Ibrahim Al-Assaf

Saudi Arabia will cut spending and issue more bonds as it faces a record budget shortfall due to falling oil prices, the finance minister said on Sunday.

Following oil prices’ drop to below $50 a barrel, the Kingdom has so far relied on its huge fiscal reserves to bridge the gap but Finance Minister Ibrahim Al-Assaf said more measures would be necessary, AFP reported.

“We are working… to cut unnecessary expenditure,” Al-Assaf told Dubai-based CNBC Arabia in an interview in Washington.

“There are some projects like the ones that have been approved a few years ago and haven’t been carried out until now which means such projects are not currently necessary and can be delayed,” he added.

“Projects in sectors such as education, health and infrastructure are not only important for the private sector but also for the long-term growth of the Saudi economy.”

He said the government would issue more conventional treasury bonds and Islamic sukuk bonds to “finance the budget deficit” — which is projected by the International Monetary Fund at a record $130 billion for this year.

The Kingdom has so far issued bonds worth “less than SR100 billion ($27 billion/24 billion euros)” to help with the shortfall, he said.

“We intend to issue more bonds and could issue sukuk for certain projects… before the end of 2015,” Al-Assaf said.

Al-Assaf said the world’s top oil exporting country was well-prepared to cope with the plunge of crude prices since last year, and that Saudi policymakers were taking it seriously.

“We have built reserves, cut public debt to near-zero levels and we are now working on cutting unnecessary expenses while focusing on main development projects and on building human resources in the Kingdom,” he said in the interview, broadcast on Sunday.