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Author: Yousef Saba
RIYADH (Reuters) – Saudi Arabia said on Sunday it expects to have its first budget surplus in nearly a decade next year as it plans to cut public spending, despite rising oil prices that have helped replenish the pandemic-ravaged state coffers.
Following the expected 2.7% fiscal deficit in gross domestic product this year, Riyadh estimates that it will achieve a surplus of 90 billion riyal ($ 23.99 billion) next year, or 2.5% of GDP. oil prices fell in 2014.
“The surplus will be used to increase government reserves, meet the needs of the coronavirus pandemic, strengthen the kingdom’s financial position and increase its capacity to deal with global shocks and crises,” Crown Prince Mohammed bin Salman told the Saudi State Press. SPA.
The world’s largest oil exporter expects to spend 955 billion rials next year, spending almost 6% a year, according to a budget document.
Riyadh plans to cut military spending by about 10% next year, according to the budget, which is a sign that the cost of the military conflict in Yemen has begun to ease.
Revenues rose almost 10% this year from 849 billion to 930 billion in the budget, driven by higher crude oil prices and rising oil production as global energy demand recovered.
Next year, the kingdom expects revenue of Rs 1,045 trillion.
Finance Minister Mohammed al-Jadaan told Reuters: “We are completely separating government spending from revenue.
“We are telling our people and the private sector or the economy as a whole that you can plan predictably. Budget ceilings will remain stable regardless of how the price of oil or revenue will turn out.”
‘INVESTMENT LOAD’
The Arab economy shrank last year as the coronavirus crisis hit a growing non-oil economic sector, while low oil prices affected its finances, widening the 2020 budget deficit to 11.2% of GDP.
But the economy has backed down this year as COVID-19 cuts eased worldwide and internally.
Saudi Arabia forecast a 2.9% increase in GDP this year and a 7.4% increase in 2022, according to the budget.
The kingdom does not disclose the price of oil it is supposed to calculate in its budget.
By 2022, its budget is likely to be based on an assumption of an oil price that could be as low as $ 50-55 per barrel, said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
This may leave more room for improvement in its fiscal position. it has risen this year and by 2021 it will average around $ 70.60 per barrel and is expected to decrease by $ 70.05 next year, according to the Energy Information Administration.
Saudi Arabia’s ability to maintain fiscal diligence depends in part on the growing role of entities such as the Public Investment Fund (PIF) or the National Development Fund to support Prince Mohammed’s ambitious investment plans.
Saudi Arabia expects to invest more than $ 3 trillion in the domestic economy by 2030, a goal that economists say will be difficult to meet.
“The budget surplus projected for 2022 is not only due to rising oil prices and production, but also to the reduction of COVID-related spending and the continued transfer of the investment burden to PIF-led state funds.” said Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes.
($ 1 = 3.7513 errial)
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