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Saudi Arabia posts record budget deficit.

Saudi Arabia plans to slash spending and introduce finance reforms in 2016 in the face of declining hydrocarbons prices, which have hit the mainly oil-based economy hard. The country announced earlier this week that it was increasing fuel prices by 50 per cent after posting a record deficit of SR 367 billion in 2015.

According to the KSA Ministry of Finance's annual budget report for 2016, actual expenditure for the 2015 fiscal year is expected to reach SR 975 billion, representing an increase of 13 per cent of the estimated budgeted spending, and an expected deficit of SR 367 billion, according to the report.

The increase in spending has mainly resulted from the additional salaries for civil and military Saudi employees, beneficiaries of social security and retirees - as per the supreme Royal Decrees issued during the current fiscal year - which amounted to SR 88 billion, representing 77 per cent of the increase in total expenditure in addition to what has been spent on military and security projects which amounted to SR 20 billion, which is equivalent to 17 per cent of the increase, and SR 7 billion spent on various other projects.

The report shows that total revenue for 2015 is estimated at SR 608 billion in FY 2015, with an estimated decline of 15 per cent compared to the budgeted revenues. Oil revenues are expected to reach SR 444.5 billion, representing 73 per cent of the total revenue, 23 per cent less than oil revenue during the previous fiscal year (2014). Non-oil revenue increased from SR 126.8 billion in 2014 by SR 36.7 billion to SR 163.5 billion; an increase of 29 per cent compared to 2014, indicating that the country is slowly peeling away from its hydrocarbons-based economy and diversifying into other sectors.

Public Debt Government bonds were issued to the local financial market during the current fiscal year, totaling SR 98 billion. By the end of the current fiscal year 2015, public debt is estimated at SR 142, equivalent to 5.8 per cent of the expected GDP this year, as compared to the public debt registered at the end of the last fiscal year (2014) of SR 44 billion, which represented two per cent of GDP for the year (2014).

Total revenues for FY 2015 are estimated at SR 513.8 billion, Government expenditures are budgeted at SR 840 billion, and fiscal deficit is projected at SR 326.2 billion. The deficit financing will take into account the best financing options available, including borrowing from the local and international markets; the scheme will be designed so not to adversely affect domestic liquidity to ensure Private Sector growth.

Due to the recent excessive volatility of oil prices and to address potentially declining revenues, a budget support provision of SR 183 billion has been established to offer increased flexibility to redirect capital expenditures and operating expenditures on both ongoing and new projects according to national developmental priorities and to meet any emerging expenditure needs in line with mechanisms and procedures of relevant royal decrees.

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Publication:CPI Financial
Date:Dec 30, 2015
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