Saudi Arabia deficit halves in H1
LONDON, August 14, 2017
Saudi Arabia’s budget deficit halved in the first six months of this year, compared to the figures last year, following sweeping spending cuts and improved oil revenues.
The deficit in the first half of this year amounted to SR72.728 billion ($19.38 billion), a decrease of 51 per cent compared to the same period last year, the Ministry of Finance said.
Total revenues for the first half amounted to SR307.982 billion, an increase of 29 per cent compared to the same period last year. Total expenditures for the H1 was SR380.71 billion, a decrease of 2 per cent compared to the same period last year.
Social sectors such as education, health, social development and municipal services accounted for 46 per cent of the first half budget expenditures.
The Ministry of Finance announced that total revenues for the second quarter of the fiscal year amounted to SR163.906 billion, registering a rise of 6 per cent over the same quarter last year.
While non-oil revenues reached SR62.916 billion, oil revenues for the second quarter were SR100.9 billion with a growth rate of 28 per cent compared to the same quarter last year, driven by improved oil prices in international markets.
Commenting on the financial results for the second quarter, Minister of Finance Mohammed Al-Jadaan said: "The financial figures announced for the second quarter reflect the improvement in the performance of the State's general finance, in addition to confirming the progress achieved on a financial performance being characterized by balance in the medium term."
As for the challenges, he said: "Although the economic challenges are still existing, we are confident that we can meet our expectations for the fiscal deficit for 2017. The second quarterly report shows the effectiveness of economic reforms and measures in the National Transformation Program within the Kingdom's vision 2030. These reforms have contributed to creating more non-oil revenues and the improvement of spending efficiency leading to a fiscal balance as a strategic objective in the medium term which is positively reflected on the economy of the homeland and the welfare of its citizens."
Assistant Minister of Finance for Technical Affairs Hindi Al-Suhaimi, revealing the figures, said there was positive growth in revenues, improvement of general spending efficiency, and a decrease in fiscal deficit, while maintaining the level of basic services being provided to citizens in the priorities of government spending.
He said the total expenditures during the second quarter amounted to SR210.42 billion with a decrease of 1.3 per cent compared to the same quarter last year. The actual expenditures rate during the second quarter was about 23 per cent from the total budget estimated during the year, while the deficit in the second quarter reached SR46.517 billion with a decrease of 20 per cent compared to the deficit recorded in the same quarter last year; and the public debt increased from SR316.580 billion to SR341.4 billion, driven by successful sukuk issuances.
Meanwhile, Al Rajhi Capital said the fiscal deficit for the whole year is likely to be closer to government forecast (SR198 billion) or 8.2 per cent of GDP but lower than 9.3 per cent deficit estimated by IMF.
At the current run-rate observed in H1, both revenue and expenditure for the full year are likely to be lower than estimated. Only if average price of oil in H2 remains greater than $50/barrel, could we expect an increase in revenue in the second half over the first, assuming similar non-oil revenue, it said.
Al Rajhi Capital said oil needs to trade at average $61/barrel in H2 to meet the government's full year oil revenue target of SR480 billion. On the other hand, though H2 expenditure could be higher than in H1 (due to reinstatement of allowances and backend weighed capex), it will mainly be determined by oil price in the remaining months of the year.
To meet its deficit in 2017, the Saudi government has planned to borrow SR70 billion locally and SR37.5 billion to SR50 billion ($10bn-$15bn) internationally in 2017. So far in H1 2017, only SR33.8bn ($9bn) has been borrowed as we believe the government also withdrew SR17bn from Sama to meet the deficit . - TradeArabia News Service
