Saudi Arabia’s Budget Exercise Shows Major Progress

Much to their credit, Saudi authorities have maintained the practice of releasing governmental budgets before start of a new fiscal year, with 2017’s being no different regardless of uncertainties in the oil market. The budget’s unveiling was accompanied by much fanfare in terms of setting the date and time for a news conference. And with enough reasons too as budgetary spending tends to make up around 30 per cent of GDP. And the private sector can take leads about economic directions from the budget. Saudi Arabia’s private investors are noted for their desire to invest in the local economy, in turn the largest GDP among Arab countries. The kingdom is the sole Arab country within the G-20 grouping, encompassing the largest economies in the world.

This marks the first budget since the release of Vision 2030 during the first half of 2016. The plan is visionary and presses for deriving maximum benefits out of the kingdom’s potential. Implementation of Vision 2030 goals is carried out via the National Transformation Plan 2020. A major objective relates to reducing oil dependency, but gradually.

As proof, the plan calls for tripling the number of people performing Umrah, which can take place any time except during Haj. Currently, some 8 million Muslims perform Umrah annually.

Still, the new budget is the first of its kind under Finance Minister Mohammad Al Jadaan, who replaced the veteran Ibrahim Alassaf.

Only weeks before the budget, Saudi authorities orchestrated a new Opec agreement involving rival Iran, with a focus on cuts, ostensibly helping pushing prices going above the $50 per barrel line.

Released figures for fiscal year 2017 and final data for 2016 are better than the wildest imagination of pessimists. The latest budget projects expenditures of $238 billion, up 6 per cent from the figure assumed in 2016, thus ending the trend of trimming spending.

Revenues are projected at $185 billion, or 31 per cent above the actual level of 2016. The projected deficit of $53 billion is down a third from 2016. Nevertheless, actual statistics could improve in the form of stronger revenues and smaller deficits. The figures for 2016 turned out to be much better than expected. The budget was prepared with expenditures and revenues of $224 billion and $137 billion, for a deficit of $87 billion. Yet, actual figures had expenditures declining marginally by1.8 per cent to $220 billion. Conversely, revenues grew by 3 per cent to $141 billion. Accordingly, the deficit was curtailed by 9 per cent to $79 billion. These are achievements in the current economic environment, characterised by low oil prices. The final deficit is around 10 per cent of GDP, The budget for fiscal year 2015 had expenditures of $230 billion and revenues of $191 billion. Yet, the year ended with expenditures and revenues of $260 billion and $162 billion, with a resulting deficit of $98 billion.

The kingdom has the capacity to raise funds. In October, a notable $17.5 billion was raised via the kingdom’s first global bond, in turn the largest by a developing country.

The government intends to wipe out budgetary deficit by fiscal year 2020, a worthwhile goal.

source : gulfnews