RIYADH: Saudi Arabia has recorded a budget deficit of SAR15.34 billion ($4.09 billion) in the second quarter of 2024, bringing the deficit for the first half of this year to 35 percent of the annual forecast set by the finance ministry.
Latest data suggests the kingdom is facing a lower-than-expected budget deficit this year, indicating a change in fiscal management or higher-than-expected revenues in the first half of 2024.
The ministry's quarterly performance report also revealed that revenue increased by 12 percent compared to the same period last year, totaling 353.59 billion riyals, while expenditure increased by 15 percent to 368.93 billion riyals.
Saudi Arabia's finance minister, Mohammed al-Jadaan, said in December that the kingdom's 2024 budget was based on “very conservative” estimates of oil revenues.
Despite this cautious approach, oil revenues in the second quarter of 2024 increased by 18 percent year-on-year to 212.99 billion riyals. Non-oil revenues also increased by 4 percent to 140.6 billion riyals.
The increase in oil revenue could be attributed to the increase in crude oil prices over the past year. In the second quarter of 2024, the average crude oil price based on the closing price at the end of the month was approximately $76.69 per barrel, compared with $71.83 in the same period of 2023.
The increase in revenue came despite OPEC+ cutting production and Saudi Arabia cutting output to 9 million barrels per day.
Goods and services tax is a driver of non-oil revenue
According to the ministry, the goods and services tax accounts for 50 percent of non-oil revenue, totaling about 70 billion Saudi riyals.
The second largest share is classified as other income, accounting for 20 percent, which includes income from sources such as government entities, including the Central Bank of Saudi Arabia, sales from entities including advertising and port services, as well as administrative fees, fines, deferred adjudication fees and seizures.
Other taxes accounted for 17 percent, or approximately SAR 24 billion, while taxes on income, profits and capital gains accounted for 9 percent, totaling SAR 12.65 billion. This significant boost underscores the Kingdom's efforts to diversify its revenue sources beyond oil, reflecting effective fiscal reforms and a broader tax base.
Saudi Arabia is taking aggressive steps to diversify its economy through investments in non-oil industries such as tourism, entertainment, and renewable energy. Initiatives such as Vision 2030 aim to reduce its dependence on oil by promoting a more diverse and sustainable economic landscape.
expenses
Saudi Arabia's non-financial capital expenditure, often referred to as CAPEX, has been a major driver of spending growth over the past period.
This category increased by 53 percent, totaling RIY 66.41 billion, and covers investments in physical assets such as buildings, machinery and infrastructure, which are aimed at strengthening the Kingdom's capabilities and capabilities.
The ministry said in its December budget statement for fiscal year 2024 that spending would be increased over the next few years to accelerate the implementation of key projects that are critical to the objectives of Saudi Vision 2030. As a result, the quarterly deficit remained within the expected range, reflecting prudent fiscal management.
Utilization of goods and services accounted for the highest proportion at 20 percent, according to the ministry's report, and increased by 19 percent over the same period.
This category represents the total amount that the government spends on procuring goods and services for purposes such as operating activities or resale, reflecting the government's consumption or investment in resources needed for its operations, excluding any changes in inventory levels.
The ministry's report said the deficit would be offset by borrowing.
Domestic debt accounted for 59 percent, or 680.29 billion riyals, of the total at the end of the period, while foreign borrowings accounted for the remaining 41 percent, totaling 468.92 billion riyals.
Compared to advanced economies and G20 countries, Saudi Arabia's public debt as a percentage of GDP remains relatively low. This is also well supported by government reserves, which act as an important buffer against potential financial challenges or economic downturns, helping to strengthen Saudi Arabia's fiscal stability and debt serviceability.
