Saudi budget deficit halves as financial reforms kick in

Saudi Finance Minister Mohammed Al-Jadaan shows documents during a press conference to unveil the country’s national budget for 2017 on December 22, 2016 in Riyadh. (AFP)
Updated 14 August 2017
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Saudi budget deficit halves as financial reforms kick in

LONDON: Saudi Arabia’s budget deficit halved in the first six months of the year following sweeping spending cuts that form part of an ambitious economic reform plan.
The deficit shrank by 51 percent to SR72.73 billion ($19.38 billion) which officials said reflected progress made in improving state finances, which were hit by the dramatic decline in oil prices from mid-2014.
“The second quarterly report shows the effectiveness of economic reforms and measures in the National Transformation Program within the Kingdom’s Vision 2030,” said Finance Minister Mohammed Al-Jadaan.
“Although the economic challenges are still existing, we are confident that we can meet our expectations for the fiscal deficit for 2017.”
Saudi Arabia has slashed government spending, rolled back subsidies and ushered in a slew of other economic reforms under Saudi Vision 2030, a plan driven by Crown Prince Mohammed bin Salman, deputy premier and minister of defense.
The plan aims to cut the Kingdom’s reliance on oil and gas by investing heavily in sectors that create economically productive jobs from finance to manufacturing.
As part of a drive to boost revenues, the government will also introduce value-added tax (VAT) next year along with its Gulf Cooperation Council (GCC) oil-exporting neighbors, which are also responding to weaker hydrocarbon prices.
Saudi Arabia’s Ministry of Finance said total revenues in the first half rose to SR307.98 billion, a 29 percent increase on the same period last year. Spending fell 2 percent compared to the same period a year earlier to SR380.71 billion, according to a statement published by the Saudi Press Agency (SPA).
Revenues for the second quarter rose 6 percent to SR163.91 billion.
About SR100.9 billion of that came from oil – a 28 percent increase on the same quarter a year ago, due to recovering prices.
Mazen Al-Sudairi, the head of research at Al-Rajhi Capital said in a note to clients that compared to other commodity-based economies, Saudi Arabia debt levels remained “very healthy.”
Al-Rajhi Capital estimates that oil would need to trade at an average of $61 per barrel in the second half of this year for the government to meet its full-year oil-revenue target.
Brent crude fell by about 0.6 percent last week to close at $52.10 per barrel.
The International Monetary Fund (IMF) last month welcomed the economic reforms introduced by the Saudi government including the planned rollout of VAT, removing obstacles to private growth and boosting bank regulation.
The IMF also cautioned that the government should closely monitor the pace of fiscal reforms and make adjustments where necessary.
“Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place,” the IMF said in a summary. “Effective prioritization, sequencing, and coordination of the reforms is essential, and they need to be well-communicated and equitable to gain social buy-in and ensure their success.”

John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh, said that the recovery in oil prices this year had been a key factor behind the reduced deficit.
“Higher budgetary revenues and a narrower deficit is clearly the result of a jump in oil revenues during the second quarter,” he told Arab News.
“The decline in non-oil revenues is the result of slower economic activity, which could show signs of recovery in the second half of the year.”


Saudi citizen rewarded after new car turned out to be used

Updated 21 July 2018
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Saudi citizen rewarded after new car turned out to be used

RIYADH: A citizen from Buraidah has been rewarded by the Ministry of Commerce and Investment (MCI) for complaining about a commercial fraud. He exposed an auto agency who sold him a “new car” which turned out to be second-hand with a chequered history.
The MCI granted a reward of SR25,000 to Hamad Faleh Al-Qahtani, who reported the fraud.
He bought a new car from the auto agency and made the full payment, but soon realized he had been given a second-hand car.
Not only was it used but it had also been in a crash and been repaired and repainted, which was contrary to what had been agreed upon and in violation of the Anti-Commercial Fraud Law. The ministry followed up the matter with investigations to find the truth and take legal action.
The matter was referred to the public prosecution and then to the Administrative Court in Buraidah, which issued the final verdict that the agency was guilty of violating the Anti-Commercial Fraud Law.
The agency was fined SR100,000 ($26,687). Article 11 of the Anti-Commercial Fraud Law states that anyone reporting a case of commercial fraud which is found to be true upon investigation shall be granted 25 percent of the value of the fine.
The MCI honors 100 informers by granting them financial rewards and gifts on World Consumer Rights Day, which is observed on March 15 every year to foster global awareness about consumer rights and needs. The day was inspired by US president John F. Kennedy, the first world leader to formally address the issue of consumer rights.
The consumer movement first marked that date in 1983 and uses it every year to mobilize action on important issues.
The MCI has urged consumers to report commercial frauds through the Consumer Call Center (1900), through the application of a commercial violation report and through the ministry’s website.