RIYADH: Saudi Arabia recorded a budget deficit of SR15.34 billion ($4.09 billion) in the second quarter of 2024, bringing the deficit for the first half of the year to 35 percent of the annual projection set by the Ministry of Finance.
Recent data indicate that the state is experiencing a lower-than-expected budget deficit for the year to date, indicating changes in fiscal management or higher-than-expected revenue in the first half of 2024.
The Ministry's quarterly performance report also showed a 12 percent increase in total revenue to Rs 353.59 billion compared to the same period last year. Meanwhile, spending increased by 15 percent to SR368.93 billion.
Finance Minister Mohammed al-Zadan said in December that the state's annual budget for 2024 was based on “very conservative” estimates of oil revenues.
Despite this cautious outlook, oil revenues increased by 18 percent in the second quarter of 2024 compared to the same period last year, totaling SR212.99 billion. In addition, non-oil receipts increased by 4 percent to SR140.6 billion.
The increase in oil revenue can be attributed to the rise in crude oil prices over the past year. In the second quarter of 2024, the average price of crude oil, based on the closing figures at the end of each month, was approximately $76.69 per barrel, compared with $71.83 in the same period in 2023.
This increase in revenue occurred despite production cuts imposed by OPEC+ and additional cuts by the state, which brought production down to 9 million barrels per day.
Taxes on goods and services drive non-oil revenue
According to the ministry, taxes on goods and services account for 50 percent of non-oil revenue, totaling about 70 billion riyals.
The second largest share, classified as other revenue, is 20 percent and includes income from various sources such as public government units including the Saudi Central Bank, sales from organizations including advertising and port services, as well as administrative fees, fines. Penalty, and forfeiture.
Other taxes made up 17 percent, or about SR24 billion, while duties on income, profits and capital gains accounted for 9 percent, totaling SR12.65 billion. This significant contribution underscores the state's efforts to diversify its sources of revenue beyond oil, reflecting effective fiscal reforms and a broad tax base.
Saudi Arabia is actively working to diversify its economy by investing in non-oil industries such as tourism, entertainment and renewable energy. Initiatives such as Vision 2030 aim to reduce oil dependence by promoting a more diversified and sustainable economic landscape.
expenses
Saudi Arabia's non-financial capital expenditure, often referred to as CAPEX, accounted for much of the expenditure growth during this period.
This category saw a 53 percent increase, totaling SR66.41 billion, and it includes investments in physical assets such as buildings, machinery and infrastructure aimed at enhancing the state's capabilities and capacities.
In its December budget statement for fiscal year 2024, the ministry indicated that it would increase spending in the coming years to accelerate the implementation of essential programs aimed at Saudi Vision 2030. Reflecting prudent financial management.
According to the Ministry's report, the utilization of goods and services was the highest at 20 percent, and increased by 19 percent during this period.
This category refers to the total amount spent on acquiring goods and services for various purposes, such as operational activities or resale. It reflects investment in government consumption or resources required for its operations, excluding any changes in inventory levels.
The Ministry's report indicated that the deficit would be covered by loans.
At the end of this period, 59 percent of the total i.e. 680 billion 29 billion rupees was internal debt, while the remaining 41 percent was external debt, amounting to a total of SR 468.92 billion rupees.
Compared to advanced economies and G20 countries, Saudi Arabia's public debt as a percentage of GDP is relatively low. Moreover, it is well backed by government reserves, providing a significant buffer against potential financial challenges or economic downturns. This strengthens the state's financial stability and ability to meet its financial obligations.
