Saudi Arabia on track to balance books by 2023

Ministry of Finance predicts a "steady decline" in the deficit. (Shutterstock)
Updated 01 October 2018
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Saudi Arabia on track to balance books by 2023

  • Total government expenditure is expected to hit SR1,106 billion next year, a 7.4 percent increase on this year’s forecast of SR1,030 billion
  • Growth in gross domestic product is forecast at 2.3 percent in 2019, up from around 2.1 percent this year

RIYADH/LONDON:  Saudi Arabia is on track to eliminate its budget deficit by 2023 and plans to increase spending by more than 7 percent next year.

The Kingdom’s economy was hit hard by the 2014 oil price crash, but the shortfall in its budget is expected to continue to narrow, the Ministry of Finance said on Monday.

The deficit — the difference between government revenues and spending — is predicted to be SR148 billion ($39.5 billion) in 2018. That is expected to decline to SR128 billion next year and enter positive territory by 2023, the ministry said. 

The Minister of Finance, Mohammed Al-Jadaan, said he expected a “steady decline in the deficit until balancing out in 2023.” 

Al-Jadaan said initiatives to develop non-oil revenues, more efficient spending, and an improvement in the targeting of subsidies had helped to narrow the deficit in the first half of 2018.

Saudi Arabia is largely dependent on oil revenues but steps are under way to diversify the economy, boost the private sector, and place a greater focus on everything from education to entertainment, and tourism to transport. 

Such measures are part of the ambitious Vision 2030 reform plans unveiled by Crown Prince Mohammed bin Salman in April 2016. 

Saudi Arabia’s government revenues are forecast to be SR978 billion in 2019, although public debt is expected to increase to SR678 billion, according to the data revealed in Saudi Arabia’s first-ever pre-budget statement.

Growth in gross domestic product is forecast at 2.3 percent in 2019, up from around 2.1 percent this year.

Total government expenditure is expected to hit SR1,106 billion next year, a 7.4 percent increase on this year’s forecast of SR1,030 billion. 

Yaser Al-Quhaidan, deputy minister for budget and organizational affairs, said the higher spending was due to factors such as financing expenses, subsidies and social benefits.

“We are taking real steps in developing the process of preparing the general budget in line with the best global practices. This includes procedures for improving the level of governance and transparency and involving government agencies,” he said.

Saad Alshahrani, head of the finance ministry’s fiscal policy department, said the government would continue to close the budget gap through measures such as reassessing government spending and encouraging more Saudi citizens to find jobs. 

Analysts noted the improvement in the Saudi fiscal budget, but warned that the economy remained vulnerable to fluctuations in the price of oil. 

“The reduction in the fiscal deficit projected for this year and next reflects sharply higher oil prices as well as increased oil production. This has allowed the government to boost spending while still reducing the budget shortfall,” Khatija Haque, head of MENA Research at Emirates NBD, told Arab News. 

“However, the budget remains vulnerable to oil price volatility.”

John Sfakianakis, director of economic research at the Gulf Research Center (GRC) in Saudi Arabia, said the forecast increase in spending should encourage investments and growth in the economy. 

“The fiscal picture is improving both in terms of revenues and a narrowing deficit this year as well as next given that oil revenues are on the rise,” he said. 

“The fiscal map should look better in 2019 and on target for a balanced budget by 2023.”

 


Saudi Arabia calls for global action to tackle ‘frightening’ terror threats

Updated 6 min 49 sec ago
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Saudi Arabia calls for global action to tackle ‘frightening’ terror threats

  • Need for world peace has never been more crucial, says Al-Mouallimi

NEW YORK: Saudi Arabia’s top envoy to the UN has called for a united global response to the “frightening” terror and security threats facing the world.

Addressing a special session of the UN General Assembly in New York, Abdallah Al-Mouallimi said the need for tolerance and peace among nations had never been more crucial.

Al-Mouallimi, the Kingdom’s ambassador to the UN, was speaking at a meeting to mark the first official International Day of Multilateralism and Diplomacy for Peace.

The envoy said the UN had originally been set up with the specific purpose of preserving peace and security and protecting future generations from the “scourge of wars which have brought untold sorrow to mankind.” But he added that the scale of the challenges now facing the global community demanded urgent action.

“Today, we need peace more than ever, as our world is witnessing frightening crises and security challenges, such as continuing occupation, marginalization and oppression, and denial of peoples’ rights, leading to the spread of extremist ideologies, hate speeches and terrorist threats,” Al-Mouallimi told assembly delegates.

“Therefore, everyone is required to cooperate and coordinate, and promote the role of multilateralism and diplomacy to preserve unity and solidarity and spread the values of peace and the culture of tolerance.”

Multilateralism, diplomacy, mutual respect and non-interference in the internal affairs of other countries were well-established principles in Saudi Arabia’s international relations, Al-Mouallimi added, and were based on the Kingdom’s Islamic faith and commitment to the three pillars of the UN Charter, namely sustainable development, peace and security, and human rights.

During his speech at the UN headquarters, Al-Mouallimi recited a verse from the Qur’an stressing the principles of tolerance in the Islamic faith. Establishing the values of multilateralism, spreading the culture of acceptance of others, and promoting peace and dialogue among different societies and civilizations, were key factors in working toward world harmony, he said.

The ambassador noted that the UN’s foundation treaty called upon regional and international organizations to play a major role in the peaceful settlement of conflicts.

He said the UN was the most representative international organization for the people and countries of the world, providing a “global umbrella” for nurturing international relations among its members.

“The security, economical and intellectual changes our world is witnessing today, require us to further focus on promoting the role of the UN and its institutions in cooperation with all regional and international organizations, grant diplomacy and multilateralism a greater role in keeping pace with change, and promote the mutual objectives of permanent peace, tolerance, and living together in peace with one another and as good neighbors,” Al-Mouallimi added.    

The Saudi envoy also met with the permanent representative of Indonesia to the UN, Dian Djani. Their talks, held in New York, reviewed Indonesia’s representation at the UN Security Council and its role in highlighting Islamic and other issues of common interest.

During their meeting Al-Mouallimi pointed to the close existing ties between the two countries and the Kingdom’s desire to further strengthen them.