Saudi Arabia has said that it intends to cut spending by 7.5% in next year’s budget, in which the volume of spending amounts to 990 billion riyals (264 billion dollars).
Spending is expected to decrease to 955 billion riyals in 2022, and to 941 billion riyals in 2023.
The cut in spending comes at a time when the world’s largest oil exporter is facing an economic downturn due to the Coronavirus pandemic, low crude prices, and oil production cuts, and a significant drop in revenues this year follows.
Reuters quoted – from a preliminary budget document – that the Finance Ministry expects the fiscal deficit for the current year to reach about $ 80 billion.
She indicated that the expected deficit for next year will be reduced to about $ 38 billion. She stated that the public debt will rise to about 228 billion dollars this year. And to about $ 251 billion in 2021.
The ministry also expected the kingdom’s economy to shrink by 3.8% this year, which is a more optimistic estimate compared to the International Monetary Fund’s expectations for a 6.8% contraction.
The economy is expected to return to growth in 2021, to achieve growth of 3.2%, supported by factors such as the continuous improvement in containing the pandemic.
Yesterday, Wednesday, official data showed that the Saudi economy shrank by 7% in the second quarter, in an indication of the depth of the repercussions of the new Corona virus on the oil and non-oil sectors.
Saudi public debt rose to about $ 181 billion by the end of 2019, and represents 24% of GDP, while it was expected to rise to $ 201 billion in 2020 (26% of GDP) before the outbreak of the virus.
Saudi budget revenues were affected by the decline in oil prices (the main source of income for the country), which necessitated a partial reduction in some of its budget items, by 50 billion riyals (13.3 billion dollars).
Saudi Arabia had announced the 2020 budget by spending $ 272 billion, compared to $ 222 billion in revenue, expecting a deficit of $ 50 billion, according to Anadolu Agency.
The economies of the Arab Gulf states consider the most important budget figures for Saudi Arabia, the largest Arab and Gulf economy, to be of great importance.
Saudi Finance Minister Muhammad Al-Jadaan had expected an increase in the volume of borrowing this year to 220 billion riyals (59 billion dollars), while it was planned to 120 billion riyals (32 billion dollars) before Corona.
Jason Tuvey, chief emerging market economist at Capital Economics, said, “The expectation of spending to decline further in the next few years means that despite recent statements by policymakers that they are studying various measures to enhance the economic recovery, it is unlikely that this includes a rollback from the fiscal austerity that has begun.” newly”.
The director of research at Al-Rajhi Capital, Mazen Al-Sudairy, said that the government should employ other tools to support the economy, “and it is likely that the role of the Public Investment Fund in supporting the local economy will increase.”