NTP 2020: 6 strategic aims for Saudi Finance Ministry

Updated 18 June 2016
0

NTP 2020: 6 strategic aims for Saudi Finance Ministry

JEDDAH: One of the key aims for Saudi Arabia’s Ministry of Finance is to achieve a balanced budget by 2020 under the National Transformation Program.

The Saudi Cabinet approved the Kingdom’s National Transformation Program (NTP 2020) on June 6, with it ushering in a major new policy era designed to overhaul the economy.
“We estimate the total cost of the NTP to be borne by both the public and private sector will be SR447 billion,” Jadwa Investment stated in a recent report.
It pointed out that the Ministry of Finance (MOF) is in charge of implementing the Kingdom’s fiscal policy, and monitoring its implementation by the relevant agencies.
Aside from preparing the annual budget, the ministry also engages with government agencies and monitors the budget’s implementation.
MoF is also in charge of supervising the collection of government revenue and ensuring compliance with relevant rules and regulations.
Under the NTP, one of the key aims for MoF is to achieve a balanced budget by 2020.
In order to help achieve this, 6 strategic objectives are specified for the ministry. The first strategic objective is to strengthen public financial governance by improving transparency of the fiscal budget. KPIs include improving the Kingdom’s score from 0/100 to 25/100 on the open budget index by 2020. The Open Budget Index is a comparative measure of central government’s budget transparency, focusing specifically on how readily the government provides the public with timely access to comprehensive information contained in the budget.
In order to help achieve this objective, the MoF is targeting more than a two-fold increase in the percentage of government entities applying the Government Finance Statistics (GFS) system, from 30 percent today to 80 percent by 2020.
The GFS system is a specialized macroeconomic statistical framework designed to support fiscal analysis. It provides the economic and statistical reporting principles used in compiling statistics.
Another strategic objective is to increase non-oil revenues from SR163.5 billion in 2015 to SR530 billion by 2020.
This objective implies a cumulative average growth rate of 26.5 percent, compared with 18.3 percent between 2011-2015.
“We see this target being achieved if a collective effort by other government bodies is made, including the Zakat and Tax Authority, Saudi Customs, and other public investment vehicles,” Jadwa researchers added. A third objective is to raise the efficiency of spending on salaries and wages to improve performance productivity, and flexibility of public authorities. The target value of wages and salaries is SR456 billion (40 percent of total spending) by 2020, down from SR480 billion (45 percent of total spending) today. This will result in a reduction in public sector employment, especially when taking together with Ministry of Civil Service’s objectives, a separate government body with its own set of initiatives.
Under the NTP, the Ministry of Civil Service will have to increase the efficiency of salary and compensation expenditure through a 20 percent reduction in the number of civil servants. Another objective for MoF is to achieve sustainability in public debt by improving the Kingdom’s credit rating from an upper medium grade (A1) to a high grade (Aa2) by 2020. The NTP specified a set of initiatives for MoF to be launched in 2016 and aimed to address some or all of the objectives listed above, the reports added.
These include the adoption of tax reforms such as value added taxes on selective goods, minimum tax deductions, fees related to the registration of real estate properties and profits, and applying a new system for Zakat collection.
The aim is to achieve this while the Kingdom takes advantage of its strong fiscal buffers by increasing debt as a percentage of GDP from 7.7 percent today to 30 percent by 2020.


US says conserving oil is no longer an economic imperative

Updated 19 August 2018
0

US says conserving oil is no longer an economic imperative

  • Fears of oil scarcity no longer driver of US energy policy
  • Surging shale production brings energy abundance

WASHINGTON: Conserving oil is no longer an economic imperative for the US, the Trump administration declares in a major new policy statement that threatens to undermine decades of government campaigns for gas-thrifty cars and other conservation programs.
The position was outlined in a memo released last month in support of the administration’s proposal to relax fuel mileage standards. The government released the memo online this month without fanfare.
Growth of natural gas and other alternatives to petroleum has reduced the need for imported oil, which “in turn affects the need of the nation to conserve energy,” the Energy Department said. It also cites the now decade-old fracking revolution that has unlocked US shale oil reserves, giving “the United States more flexibility than in the past to use our oil resources with less concern.”
With the memo, the administration is formally challenging old justifications for conservation — even congressionally prescribed ones, as with the mileage standards. The memo made no mention of climate change. Transportation is the single largest source of climate-changing emissions.
President Donald Trump has questioned the existence of climate change, embraced the notion of “energy dominance” as a national goal, and called for easing what he calls burdensome regulation of oil, gas and coal, including repealing the Obama Clean Power Plan.
Despite the increased oil supplies, the administration continues to believe in the need to “use energy wisely,” the Energy Department said, without elaboration. Department spokesmen did not respond Friday to questions about that statement.
Reaction was quick.
“It’s like saying, ‘I’m a big old fat guy, and food prices have dropped — it’s time to start eating again,’” said Tom Kloza, longtime oil analyst with the Maryland-based Oil Price Information Service.
“If you look at it from the other end, if you do believe that fossil fuels do some sort of damage to the atmosphere ... you come up with a different viewpoint,” Kloza said. “There’s a downside to living large.”
Climate change is a “clear and present and increasing danger,” said Sean Donahue, a lawyer for the Environmental Defense Fund.
In a big way, the Energy Department statement just acknowledges the world’s vastly changed reality when it comes to oil.
Just 10 years ago, in summer 2008, oil prices were peaking at $147 a barrel and pummeling the global economy. OPEC was enjoying a massive transfer of wealth, from countries dependent on imported oil. Prices now are about $65.
Today, the US is vying with Russia for the title of top world oil producer. US oil production hit an all-time high this summer, aided by the technological leaps of horizontal drilling and hydraulic fracturing.
How much the US economy is hooked up to the gas pump, and vice versa, plays into any number of policy considerations, not just economic or environmental ones, but military and geopolitical ones, said John Graham, a former official in the George W. Bush administration, now dean of the School of Public and Environmental Affairs at Indiana University.
“Our ability to play that role as a leader in the world is stronger when we are the strongest producer of oil and gas,” Graham said. “But there are still reasons to want to reduce the amount we consume.”
Current administration proposals include one that would freeze mileage standards for cars and light trucks after 2020, instead of continuing to make them tougher.
The proposal eventually would increase US oil consumption by 500,000 barrels a day, the administration says. While Trump officials say the freeze would improve highway safety, documents released this month showed senior Environmental Protection Agency staffers calculate the administration’s move would actually increase highway deaths.
“American businesses, consumers and our environment are all the losers under his plan,” said Sen. Tom Carper, a Delaware Democrat. “The only clear winner is the oil industry. It’s not hard to see whose side President Trump is on.”
Administration support has been tepid to null on some other long-running government programs for alternatives to gas-powered cars.
Bill Wehrum, assistant administration of the EPA’s Office of Air and Radiation, spoke dismissively of electric cars — a young industry supported financially by the federal government and many states — this month in a call with reporters announcing the mileage freeze proposal.
“People just don’t want to buy them,” the EPA official said.
Oil and gas interests are campaigning for changes in government conservation efforts on mileage standards, biofuels and electric cars.
In June, for instance, the American Petroleum Institute and other industries wrote eight governors, promoting the dominance of the internal-combustion engine and questioning their states’ incentives to consumers for electric cars.
Surging US and gas production has brought on “energy security and abundance,” Frank Macchiarola, a group director of the American Petroleum Institute trade association, told reporters this week, in a telephone call dedicated to urging scrapping or overhauling of one US program for biofuels.
Fears of oil scarcity used to be a driver of US energy policy, Macchiarola said.
Thanks partly to increased production, “that pillar has really been rendered essentially moot,” he said.