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

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 Arabia, UAE agree on joint program to test supply chain and security systems

Updated 3 min 37 sec ago

Saudi Arabia, UAE agree on joint program to test supply chain and security systems

  • The test is in preparation for a crisis or disaster

JEDDAH: Supply chains and security systems are to be tested in preparation for a crisis or disaster in Saudi Arabia and the UAE, one of several initiatives agreed on Saturday by a body representing both countries.

The Saudi-UAE Coordination Council held its first executive committee meeting in Abu Dhabi. 

It was chaired by Minister of Economy and Planning Mohammed bin Maziad Al-Tuwaijri from the Saudi side, and Minister of Cabinet Affairs and the Future Mohammed bin Abdullah Al-Gergawi from the UAE side.

Al-Tuwaijri said the meeting was a continuation of the achievements made in bilateral relations.

A joint security cooperation program was signed to test the supply chain and security systems in the major sectors during a crisis or disaster, identify the points for improvement and develop a plan to address them.

It was agreed to introduce and market the products of small traders through joint events.

A virtual e-currency project was launched, but only on a trial basis. It will be restricted to trading between some banks in the Kingdom and the UAE in order to explore and prepare for future technologies.

Al-Tuwaijri also visited the Saudi Arabian pavilion at Expo 2020 in Dubai, heading an official delegation from the Kingdom.

The group was received by the minister of state for international cooperation and director general of the expo, Reem bint Ebrahim Al-Hashimy.

Saudi Arabia was the first international participant to begin building its pavilion for the event.

The Kingdom and the UAE have the two largest economies in the Gulf Cooperation Council and a combined gross domestic product of around $1 trillion.

There was a Saudi-UAE Coordination Council meeting last June in Jeddah that was chaired by the Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed and the Kingdom’s Crown Prince Mohammed bin Salman.  

The two main goals set out at that meeting were to enhance the domestic economy of both nations and counter threats to Gulf and Arab security.