IMF: $98 per barrel oil benchmark needed to balance Saudi budget by 2016

International Monetary Fund (IMF) has warned that Saudi Arabia's government should watch it’s spending if it wants to preserve the country's oil wealth for future generations. IMF said the country’s government is spending more than it should but did not specify an appropriate level of spending. However, it advised the government to be flexible in providing social welfare benefits and broaden its tax base so as to ensure its expenditure was efficient.

In an annual assessment of the Saudi’s economy, IMF said that "while the government has built significant policy buffers, fiscal spending is above the level consistent with an inter-generationally equitable drawdown of oil wealth."

Saudi Arabia, in response to unrest in the Arab world, had boosted spending to a record 804 billion riyals ($214 billion) in 2011, 39 percent more than initially planned and 23 percent higher than in 2010, its fastest growth in a decade. In May, Finance Minister Ibrahim Alassaf said there might be a bit of extra spending this year, adding that the kingdom's fiscal position was comfortable.

The OPEC member, who overshot its annual budget plans by an average 23 percent in the past decade, outlined spending of 690 billion riyals in its 2012 budget. Due to heavy spending, the Gulf country's dependency on oil has risen notably. The price of crude that is needed to balance the government budget is projected to rise to $98 per barrel by 2016 from an estimated $80 in 2011, the IMF said in April. However, robust oil prices, currently above $110 per barrel, have been helping to boost Saudi Arabia's fiscal cushion.