Saudi Arabia’s budget deficit jumps to $22bn on higher government spending

Saudi Arabia’s budget deficit reached 80.9 billion Saudi riyals ($21.57 billion) in the 2023 fiscal year, narrower than the government’s previous estimates, as oil revenue dipped amid production cuts.

It came as the kingdom increased its spending to boost the economy, the Ministry of Finance said.

The government had in December estimated a deficit of 82 billion riyals for 2023, and predicted a deficit of 79 billion riyals for this year.

The Arab world’s largest economy reported a budget surplus of more than 103.85 billion riyals ($27.68 billion) for the 2022 financial year, amid a surge in crude oil prices.

But it was followed by plummeting oil prices and repeated production cuts throughout the last year, pushing the budget into deficit. The kingdom’s total revenue dropped by about 4 per cent on a yearly basis to more than 1.21 trillion riyals in 2023.

Oil revenue fell by 12 per cent annually to 754.56 billion riyals while non-oil revenue surged 11 per cent to 457.72 billion riyals.

The kingdom’s total expenditure for last year jumped by 11 per cent to more than 1.29 trillion riyals while total debt stood at 1.05 trillion riyals, the government said.

Saudi Arabia, the world’s biggest oil exporter, is transforming its economy under its Vision 2030 diversification agenda as it aims to reduce its dependence on oil, broaden its non-oil economic base and support domestic industries and job growth.

The kingdom’s economy is projected to expand 2.7 per cent this year and 5.5 per cent in 2025, after contracting by an estimated 1.1 per cent last year due to cuts in oil output, according to the latest International Monetary Fund estimates.

The kingdom, which benefitted from the rally in crude prices last year amid the Ukraine war, has cut oil output in an attempt to stabilise the market.

However, non-oil economic growth has remained robust on government initiatives as the kingdom opens up various sectors for foreign investment.

The kingdom is developing several new projects spanning sectors including property, tourism, entertainment and infrastructure. Riyadh also enacted a regulation this year requiring international businesses to set up a local base or face the risk of losing out on government contracts.

In the fourth quarter of last year, the budget deficit jumped 3 per cent on a quarterly basis to 36.99 billion riyals.

Oil revenue increased 28 per cent annually in the October-December period to 249.21 billion riyals while non-oil revenue decreased 12 per cent to 108.77 billion riyals.

Revenue and spending in the last quarter stood at 357.98 billion riyals and 394.97 billion riyals, respectively.

Business activity in the kingdom’s non-oil private sector economy remained robust last month, amid continued growth momentum.

The seasonally adjusted Riyad Bank purchasing managers’ index – a crucial gauge of the kingdom’s non-oil economy – stood at 55.4 in January.

Total expenditure for last year climbed 11% to more than 1.29 trillion riyals while total debt stood at 1.05 trillion riyals