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Gulf States to Run 'Out of Cash' in Five Years if Oil Prices Remain Same

© Flickr / Crazy DiamondIf global oil prices continue to stay around $50 a barrel, oil exporting Gulf States are going to have the grave economic future, IMF economist Bruno Versailles told Radio Sputnik.
If global oil prices continue to stay around $50 a barrel, oil exporting Gulf States are going to have the grave economic future, IMF economist Bruno Versailles told Radio Sputnik. - Sputnik International
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If global oil prices continue to stay around $50 a barrel, oil exporting Gulf States are going to have the grave economic future, IMF economist Bruno Versailles told Radio Sputnik.

Over the next five years or even less, Gulf States would literally run out of money if the current trend in the oil market continues, the economist said.

Of course, a country could choose to print more money, but that would lead to the devaluation of a national currency. However, according to Versailles, Gulf States can't even opt to do that.

Since countries like Saudi Arabia, Oman and Bahrain generate most of their income from the export of oil, they are at the highest risk of going bankrupt. The economies of these countries aren't diverse, which means they can't really rely on other industries to keep their economies afloat, Versailles explained.

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Saudi Arabia, the world's largest oil exporter, in particular is having serious troubles with its budget. Over 90% of Saudi Arabia's revenue is dependent on oil, and with prices dropping by more than 50% in the last year, the government is struggling to deal with the financial pressure.

According to the International Monetary Fund (IMF), the desert kingdom is expected to end the year with a budget deficit of 20% on gross domestic product. For the first time since 2007, the country has issued securities with a maturity of 12 months.

The IMF also reported that Saudi Arabia's economic growth is expected to slow in the few years, as the government is forced to reduce spending.

The oil market has dramatically changed since last summer due to oversupply in the market. In November 2014, OPEC decided to keep its oil output levels unchanged, which led to a further slump in crude oil prices. 

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