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.”


King Salman, Crown Prince Mohammed ‘lend new dimension to unification’

Millions of citizens plan to celebrate the Saudi national day on Sunday. (SPA)
Updated 23 September 2018
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King Salman, Crown Prince Mohammed ‘lend new dimension to unification’

  • More than 900,000 fireworks will light up the sky from 58 locations across the Kingdom

RIYADH: Saudi Arabia’s National Day, celebrated every year on Sept. 23, has come a long way in broadening the concept of unification over the years.
Though the National Day meant unifying disparate sheikhdoms under the nation’s founder, the late King Abdul Aziz, its implications across the political, socioeconomic and cultural spectrum have not been lost on successive rulers.
It was King Salman and Crown Prince Mohammed bin Salman who fine-tuned the definition of unification as an operating philosophy. This is why millions of citizens plan to celebrate the Saudi National Day on the streets on Sunday.
The capital city, along with other Saudi cities, will witness fireworks and the unfurling of the largest national flag. More than 900,000 fireworks will light up the sky from 58 locations across the Kingdom.
Car owners, limousine drivers and young Saudi motorcyclists said that they planned to go for drives, particularly on the fashionable streets of the capital city, to celebrate. Grocery shops, stationery shops and vendors were selling bunting, flags, banners and pictures of national heroes.
“We went around the city to see the lighting and fireworks,” said Saleh Al-Omri, a local pharmacist. “Green and white balloons fill either sides of Riyadh streets,” he said.
In his National Day congratulatory message, Sheikh Abdul Aziz bin Abdullah Al-Sheikh, Grand Mufti of Saudi Arabia, said: “The wise policy of the leaders of this country contributed to peace, security and stability.”
Fakhr Al-Shawaf, chief executive of Al-Bawani Contracting Co., said: “We are celebrating the 88th anniversary of our unification, a day when the late King Abdul Aziz established the Saudi nation.”
Ali Al-Othaim, a member of Riyadh Chamber’s board of directors, said: “The Kingdom is on the path of comprehensive economic and social development under Vision 2030.”
Shafik Namdar, a taxi driver, said that he had bought an SR10 flag for his car and planned to work and also drive with his friends to look at the city and its landmark buildings.
Several young boys, including Arslan, 12, and Mishal, 14, said that they had bought bunting, badges and flags to decorate their houses. They planned to celebrate with a special meal at home with relatives, before going into the city streets for dance and music. Some of them had plans to organize celebrations in public parks.