It has been almost a week since the Kingdom announced its budget for the next fiscal but the discussions following it are still diverse.
What most analysts, at least, agree on is that it is a very critical budget for the country. No quantum physics equations are needed to realize that the plunging oil prices we have seen in 2015 are putting the country’s finances under pressure. Add this to the fact that we are engaged in a fight against terrorism on our southern and northern borders and you would probably end up being shocked by how good the budget of 2016 actually is.
Honestly, we as Saudis, and some few neutral analysts, were expecting a much tighter budget for next year. However, it was bit of a surprise that the country is still planning to heavily invest in its future. Education is still receiving the highest allocation of SR191.659 billion, followed by health and social development with SR104.864 billion. Other allocations including municipality services (SR21.246 billion), military and security services (SR213.367 billion), infrastructure and transportation (SR23.903 billion), economic resources (SR78.121 billion), public administration (SR23.840 billion), and budget support provision (SR183 billion) are still considered relatively high. That what prompted Economy and Planning Minister Adel Fakeih to note that “So, given the huge drop that took place over the year, the change in the estimated budget for 2016 versus 2015 is not that much,” as reported by the Washington Post.
Nevertheless, this should not deter us from dealing with warning signs caused by our hunger and dependency on oil as the main source of income. We have heard about and worked on different plans to diversify our sources of income, but the effects on the outcome are still minimal and are hardly tangible. It is now time to work harder, to shift gears, and force different strategies into the economy in order for it to do away with its dependence on oil and move in different directions.
The involvement of the private sector is a cornerstone in this journey. For all of those who have been benefiting from the relaxed taxes environment on businesses in the country and enjoying all the subsidies on electricity, gas, and fuels on their factories, companies, and fleet of cars, it is time for them to show that those incentives the country has provided them in order to grow was beneficial, not for them alone, but for the whole economy. The ball of production and employment is in their court now; they can make profits and get bigger, their social responsibility dictates that they have to enrich the environment they are working in.
We have to admit that we have been dependent on government subsidies to the point that we have lost any sense of monitoring our consumption. Few of us are even remotely familiar with concepts like saving energy or protecting environment because they are hardly making any impact on our daily lives. Saudi Arabia is the biggest energy consumer in the Middle East. “Energy demand in Saudi Arabia has increased annually by an average of 7.5 percent over the last five years. Economic and population growth explain some of the surge; even with oil prices flat or decreasing, real GDP rose by 3.6 percent in 2014. However, Saudi Arabia has not used energy efficiently. The Kingdom’s energy intensity (defined as total energy consumption per unit of GDP, where Saudi Arabia is 4.1 when the UK sets 1 at 2013) is four times that of energy efficient countries, such as Britain and Germany, and their energy consumption per capita is high,” as mentioned in a report by the Center of Middle East Policy at Brookings.
It is an economically challenging time for the country. But we still have the capability to face these challenges, as Custodian of the Two Holy Mosques King Salman said in his speech “Our economy has the potential to meet challenges.”
