Arab News, Sat, May 11, 2024 | Dhu al-Qadah 3, 1445
Saudi Arabia’s Q1 budget deficit aligns with expectations; non-oil revenues rise by 9%
Saudi Arabia:
Saudi Arabia recorded a budget deficit of SR12.4 billion ($3.3 billion) in the
first quarter of 2024, comprising 16 percent of the annual deficit forecast set
by the Ministry of Finance at the end of the previous year.
This suggests that it aligns with expectations,
showcasing the Kingdom’s progress in accelerating spending related to Vision
2030 implementation, alongside its careful fiscal management.
The Ministry’s quarterly performance report also
revealed an annual 9 percent boost in its non-oil revenues to reach SR293.43
billion, primarily driven by increased taxes on goods and services.
Report data showed these taxes surged by 11
percent to approximately SR70 billion in the specified period. This income
source constituted nearly a quarter of total government revenues and
approximately 63 percent of non-oil income.
This typically refers to taxes imposed on
particular products or services, rather than on individuals or businesses as a
whole. Examples include Excise Tax, Value-Added Tax, and specific levies such as
those targeting expatriates.
The percentage share of non-oil revenues from the
overall government income increased to 38 percent, up from 36 percent in the
same quarter of 2023.
The second largest factor driving the non-oil
revenue growth is categorized as Other Revenues, which, as per the Ministry’s
report, includes income from a variety of sources.
These encompass revenues from other public
government units, including the Saudi Central Bank, sales conducted by other
entities such as income from advertising and fees from port services,
administrative fees, fines, penalties, and confiscations.
Conversely, oil revenues experienced a 2 percent
uptick, reaching SR181 billion. However, their percentage share decreased from
64 percent in the same quarter the previous year to 62 percent. This brought
total government revenues to SR293.43 billion.
The tightening of oil revenues can be linked to
the voluntary oil production cuts adopted by members of the Organization of the
Petroleum Exporting Countries and their allies, known as OPEC+. Saudi Arabia
announced in March the extension of its 1 million barrels per day cut, initially
implemented in July 2023, until the end of the second quarter of 2024.
Government expenditure
Expenditures surged by 8 percent during this
period, reaching SR305.82 billion, with non-financial capital expenditure, often
referred to as CAPEX, driving much of this growth.
This category saw a substantial 33 percent
increase, totaling SR34.5 billion, and it encompasses investments in physical
assets like buildings, machinery, and infrastructure, aimed at enhancing the
Kingdom’s capacity and capabilities.
The Ministry had indicated in its budget statement
in December for the fiscal year 2024 that there will be increased spending
during the coming years to expedite the implementation of key programs vital to
the objectives of Saudi Vision 2030. Therefore, the quarterly deficit remains
within expectations, reflecting prudent fiscal management.
The second most significant factor driving the
increase in expenditure is the utilization of goods and services, which surged
by 12 percent during this period, reaching SR60.7 billion. Accounting for 20
percent of total expenditure, their substantial share amplified their impact.
This category represents the total amount spent on
acquiring goods and services by the government for various purposes, such as
operational activities or resale. It reflects the government’s consumption or
investment in resources necessary for its operations, excluding any changes in
inventory levels.
In third place was the compensation of employees,
making up the largest portion of the total at 45 percent, reaching SR137.5
billion. However, its growth during this period was only 3 percent.
According to the Ministry’s report, this refers to
the compensation received by an employee for the work they perform, which can be
in the form of cash or non-monetary benefits. It includes any social security
contributions that the government unit pays on behalf of its employees.
Although subsidies account for a small portion of
government spending, at 3 percent, they experienced the highest growth rate,
reaching SR8.33 billion, highlighting the Kingdom’s dedication to investments in
education, health, and social protection programs.
Additionally, the data revealed that health and
social development were the second-largest contributors to expenditure growth,
increasing by 20 percent to reach SR60.5 billion, following municipal services.
The Ministry’s report indicated that the deficit
will be covered entirely through borrowing. Domestic debt accounted for 60
percent, or SR665.03 billion, of the end-of-period debt balance, while the
remaining 40 percent came from external debt, totaling SR450.8 billion.
Compared to advanced economies or G20 countries,
Saudi Arabia’s public debt as a percentage of GDP remains relatively low.
Additionally, it is well-covered, with government reserves totaling around SR392
billion in the first quarter of this year.
This robust reserve level provides a substantial
buffer against any potential financial challenges or economic downturns,
enhancing the Kingdom’s fiscal stability and ability to meet its financial
obligations.