Jim Rickards writes: “Saudi Arabia may take in massive revenues from oil sales, but it has massive expenses to match. Over 50% of the native Arabs in the kingdom have low-productivity government jobs. Saudi Arabia provides massive subsidies for water, gasoline, food and other staples. Defense spending has been ramping up due to threats from Iran, Yemen, ISIS and other sources. As a result, Saudi Arabia is running massive budget deficits. It is also running capital account deficits as the threat of devaluation of its currency leads to capital flight. Saudi Arabia’s reserves are being depleted at an unsustainable rate. One obvious solution is to devalue the currency against the dollar, something we expect will happen eventually. For now, Saudi Arabia is seeking to plug its deficit with an $8 billion bailout loan: its first such borrowing in over 10 years. This will not solve the problem; it will just delay the inevitable day of reckoning.”

Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom’s government for over a decade.

Source: Exclusive: Saudi Arabia seeks $6-8 billion bank loan to shore up state coffers | Reuters