Saudi Arabia facing Cash Crunch and Unemployment

Saudi Arabia's main source of revenue that makes up to 88 percent of its total income has always been oil. Since the Arab Spring, Saudi Arabia's government gained leverage among its citizens by using its massive oil wealth to give them generous benefits. Perks included free healthcare and education as well as no income tax and interest free funds for families that wanted to buy homes or start businesses. Many Saudi citizens rely on these benefits since a majority are employed by the Saudi government. However, the recent crash of oil prices will see these benefits severely cut. These gas hikes aren't the only thing citizens are worried about, electricity and water prices are also increasing.

The rapid decrease in Saudi's foreign exchange funds is reason for alarm. Last year in 2015, the Kingdom's bank reserves fell from $732 billion to $623 billion. If this trend continues and gas prices stay below $50 a barrel, the International Monetary Fund predicts Saudi Arabia could run out of cash in less than five years. To counter the gas hike, experts worry the Saudi regime might start collecting income or sales tax. A tax will inevitably lead to an increase in political unrest as unemployment is already high in Saudi Arabia. Youth unemployment in those aged 15-24 is 30 percent.


Disenfranchised youth could join radical groups and destabilize the country even further. With two-thirds of the Saudi population under age 30, this socio-economic challenge is the mother of all problems in the Kingdom which is also dealing with a war in Yemen and supporting rebels in Syria. All these factors will impact the Kingdom's financial position.