Friday 29th of March 2024
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Saudi budget deficit dwindles as oil, tax revenue boosts
  Date : 29-03-2024

Higher oil prices give Saudi Arabia’s public finances a boost nearly 300 billion riyals.

Diplomatic Correspondent: The world’s largest crude exporter experienced its oil revenue rise 38 per cent in the second quarter of 2021 compared to the same period last year, according to the Saudi finance ministry.

Saudi Arabia’s budget deficit dwindled to 4.6 billion riyals ($1.2 billion) in the second quarter, boosted by higher oil prices and surge in tax revenue.

The world’s largest crude exporter saw oil revenue rise 38% in the period from April to June compared to the same period last year, while non-oil revenue tripled, reaching 116 billion riyals, according to a finance ministry statement.

That was largely driven by increased tax revenue after the government tripled value-added tax to 15% last July – and the comparison with a low base during last year’s lock-down. Spending remained restrained, at around 253 billion riyals.

Higher oil prices are giving Saudi Arabia’s public finances a boost after last year’s crisis sent its budget deficit soaring to nearly 300 billion riyals. Officials aim to slash that figure to 141 billion riyals in 2021, targeting a deficit of around 5% of gross domestic product. But so far they’re set to significantly beat that goal, accumulating a deficit of just 12 billion riyals in the first half of the year as they keep spending under their target — with capital expenditures down 36% in the first half compared to the same period last year.

“We expect the deficit will slide to 62 billion riyals for the full year,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital, adding that the gap would be “supported by oil revenue that benefited from the market recovery.”

The government also borrowed far more than it needed in the first six months of the year, raising almost $14 billion from a mixture of local and international investors, outstripping the $3.2 billion deficit. That excess borrowing would be used to fill the financing needs in the second half, the Finance Ministry said.

The surge in non-oil revenue reflects not only higher taxes but also “the sharp recovery in non-oil economic activity, which has already reached pre-pandemic levels,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Other figures from the report include:

•           Spending on government employees’ wages fell 1% in the first half compared to the same period last year, after the government removed a “cost of living” allowance for workers last year, citing strained finances

•           Military spending declined 2% in the first half, while spending on municipal services tumbled 25% and spending on infrastructure and transportation fell 19%

•           Spending on health and social development rose 20% as the government devoted more funding to grappling with the pandemic, as are reported from the concerned news agency.



  
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