Kingdom Announces Largest Budget in its History

by shariff mohammed | Feb 01, 2018

King Salman bin Abdulaziz Al Saud approved State's General Budget for the fiscal year 2018. The King addressed the nation, announcing the budget, as the largest expenditure budget in the history of the Kingdom. He asserted that the budget takes into account the lower oil price levels compared to previous years, and has been planned in order to continue development and enhancement process towards achieving the Kingdom's Vision 2030, that aims at increasing the size of the national economy and sustain its growth, through diversification of the economic base, sources of income and the capacity to adapt to developments and for overcoming challenges.

The King said that dozens of programs have been launched to realize the goals of diversifying the economic base and empower the private sector to play a major role, in sustaining expenditure efficiency, in order to realize appropriate economic growth rates, mitigate the burden on the citizens and tackle possible impacts, in addition to supporting the private sector.

He hailed the achievements related to decreasing the deficit of the budget of the current fiscal year to 8.9 percent of the GDP from 12.8 percent during the last fiscal year. Despite increasing the expenditure in next year's budget, he added that the target is to decrease the deficit to be less than 8 percent of the Gross Domestic Product, in spite of the great and expansionary volume of the budget.

The King stated that government programs have managed to downsize depending on oil to about 50 percent, adding that the development funds and the General Investments Fund take part in the capital and investment expenditure, with portions that exceeded capital expenditure volume, in the budgets of previous years, in addition to government keeping leading with capital expenditure, at an increase of 13 percent.

As a result, the government decided to invest these successes, expand development and adjust the fiscal balance program till the year 2023. While maintaining fiscal policies- including the level of debt to GDP to remain below 30 percent with a level of deficit to be gradually decreased.

The king said “this budget continues to disburse on various development sectors in all regions of the Kingdom at high rates. It also includes allocations for housing, and a large expenditure of government funds that would contribute to push the economic wheel forward, and provide more employment opportunities for male and female citizens.”

The king announced that he directed “ministers and all officials to raise the level of performance, develop government services and enhance the efficiency of expenditure and transparency to meet the aspirations and the satisfaction of citizens for the services provided to them as well as to reflect the desired objectives of the allocated amounts in this budget, and the emphasis on continuing to fight corruption and maintain public money. He emphasized that the budget takes into consideration the “continuation of work towards comprehensive and balanced development in all regions of the Kingdom, without any distinction.”

 Highlights of the Saudi Budget 2018:

  • Approved 2018 Saudi budget: Expenditure 978 billion SR, revenues 783 billion SR, deficit 195 SR
  • Expected 2019 Saudi budget: Expenditure 1006 billion SR, revenues 843 billion SR, deficit 163 billion SR
  • Expected 2020 Saudi budget: expenditure 1050 billion SR, revenues 909 billion SR, deficit 141 billion SR
  • Expected 2021 Saudi budget: expenditure 1080 billion SR, revenues 955 billion SR, deficit 126 billion SR
  • Expected 2022 Saudi budget: expenditure 1107 billion SR, revenues 1049 billion SR, deficit 57 billion SR
  • Fiscal balance expected to be achieved in 2023 with expenditure of 1134 billion SR, revenues 1138 billion SR, surplus 4 billion SR
  • The 2018 state budget has the biggest expenditure of any adopted budget in the kingdom’s history, and it will be funded from the following sources: 50 percent from oil revenues, 30 percent from non-oil revenues, 12 percent from debt and 8 percent from government balances
  • In 2018, tax on goods and services will generate around 85 billion SR
  • The budget allocates 2.5 billion riyals a month to the Citizens’ Account in 2018
  • Public debt’s percentage compared to GDP will not exceed 25 percent during fiscal balance phase
  • General reserves will not decrease below 250 billion SR during financial balance phase
  • Gradual increase of energy, water prices as expats’ levy continues to increase as previously announced
  • General expenditure in 2018 to include general budget expenditure, expenditure of Public Investment Fund, other development funds
  • Expenditure of Public Investment Fund, other development funds in 2018 to reach 133 billion SR
  • Total value of government’s capital expenditure is 338 billion SR
  • Funds’ capital expenditure to be spent on housing, energy, mining, industry, transportation, entertainment, communication, technology and small and medium-sized enterprises
  • GDP decreased by 0.5 percent in 2017, to increase by 2.7 percent in 2018
  • GDP of non-oil private sector increased by 1.5 percent in 2017, to increase by 3.7 percent in 2018
  • Total value of stimulus packages for private sector are 200 billion SR
  • Capitals of Industrial Development Fund, Real Estate Development increased by 40 billion SR in 2018
  • 72 billion SR will be spent on recent stimulus packages from 2017 until 2020
  • Remaining 88 billion SR are for future packages aimed at developing private sector, supporting local content

Our Aim is to Improve Citizen’s Living Standards: Crown Prince

Saudi Crown Prince Mohammed Bin Salman Al-Saud affirmed that improving the standard of living for Saudi citizens is at the heart of the efforts being pursued by the Kingdom's government to diversify the economy and achieve financial stability and generate more jobs for citizens. The Crown Prince said in a press statement following the announcement of the state budget for the fiscal year 1439/1440 H (2018) that this is the largest government spending program in the history of the Kingdom and it is a strong indication of the success of the efforts to improve public financial management, despite the significant decline in oil prices from previous years, according to Saudi Press Agency.

Mohammed bin Salman stressed that the 2018 expansionary budget included a comprehensive set of new development initiatives aimed at achieving financial and economic stability characterizing vision of 2030.

Main economic sectors

It is planned to stimulate the main economic sectors, thus generating employment opportunities, improving basic services to citizens and developing infrastructure projects.

The crown Prince highlighted that the expenditure of the public sectors in the country has been coordinated to achieve the development goals for the next fiscal year and that the expenditure will come from three main sources as the budget will reach 978 billion riyals, in addition to 50 billion assigned from the development funds under the National Development Fund which finances residential, industrial and mining projects.

The third source of capital and investment spending will support the economy and the development in investment spending within the Kingdom from the Public Investment Fund to finance its new and existing projects.

The fund is expected to spend up to 83 billion riyals in the next fiscal year, thus increasing the total public spending to more than 1.1 trillion Saudi riyals in 2018.

The Saudi Crown Prince said that government will do all it can to promote economic growth and improve the standard of living of citizens pointing out that a large proportion of the total estimated capital expenditure in 2018 of approximately 338 billion Saudi Riyals will come from the Public Investment Fund and the National Development Fund (133 billion) and that the capital expenditure of the budget (205) billion Saudi riyals will constitute a major leap in capital expenditure.

 


KSA Estimates Revenue of SR85 billion from Goods and Services Tax

The Ministry of Finance in Saudi Arabia said that they expect to make revenue of SR85 billion once the Goods and Services Tax (GST) is implemented in 2018.

This would enhance general budget revenues, an estimated 30 percent of which are going to be non-oil related revenues. These revenues will support the biggest expenditure of any adopted budget in the kingdom’s history.

The VAT tax, set to be implemented in January of 2018, is also estimated to create revenues of 1.5 percent to 2.5 percent of the kingdom’s Gross Domestic Product. This means that yearly revenues will be around SR22 billion to SR35 billion, according to estimates and statistics from financial institutions.

A selective commodity tax, which was introduced months ago targeting luxury goods and goods that pose damage to public health and the environment, is expected to create revenues of five to seven billion Saudi Riyals by the end of this year.

With regard to expatriate fees, their expected revenues will rise from 1 billion riyals in 2017 to 24 billion riyals in 2018 to reach 65 billion riyals by 2020.

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