Talat Hafiz
Saudi budget: Strong financial fundamentals despite the deficit

The Saudi Ministry of Finance (MoF) has announced the financial results of the budget for first quarter of this year. The results showed financial deficit of SAR. 34 billion as a result of total public expenditures of SAR.226 billion exceeding total revenues of SAR. 192 billion, by 15%.

The results reflected a reduction of 22% in the total revenues achieved in the first quarter of this year compared with the same quarter of last year. Such reduction is attributed to the drop in the oil and non-oil revenues by 24% and 17% respectively. The main reason behind the reduction in the oil revenues, was the fluctuations in the world oil prices and the disruption in the supply and demand in the oil marker, while the reduction in the non-oil revenues was due to the reductions in the revenue generated from taxes levied on goods and services and other taxes, which they have dropped by 17% and 71% respectively.

It is worth pointing out that the main reason behind the increase in the total expenditures in the first quarter of this year was due to the increase in the government spending on goods and services and other expenses by 74% and 32% respectively from the same quarter of the previous year.

The government has financed the budget deficit by raising internal and external debit of SAR. 11.2 billon (internally) and 18.5 billion (externally) and in addition by with the withdrawal of SAR. 9 billion from the current account. 

It is worth noting that the government has borrowed more than what was needed to finance the existing deficit (approximately SAR.39 billion) on the assumption that the excess amount will be used to finance future deficit in the current year.

As a result of the internal and the external (issuances or borrowing) debit during the first quarter of this year, the size of public debt has increased from about SAR. 678 billion at the beginning of the first quarter of this year to SAR. 723 billion at the end of the quarter and the volume of the internal issuances or borrowings amounted to SAR. 26.8 billion, while the volume of the external issuances or borrowings amounted to SAR. 18.8 billion.

Despite the budget deficit recorded in the first quarter of this year, yet I believe that the fundamentals of the financial position of the Saudi government is strong, especially when considering the substantial reserves in foreign currencies which ranks the third in the world and the low deficit figure as a percentage to GDP of 4.5% in 2019.


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