RIYADH: Saudi Arabia posted a budget deficit of SR15.34 billion ($4.09 billion) in the second quarter of 2024, pushing this year's first-half shortfall to 35 percent of the annual forecast set by the finance ministry.
The latest data suggests the kingdom is experiencing a lower-than-expected budget deficit so far, suggesting a shift in fiscal management or higher-than-expected revenue in the first half of 2024.
The ministry's quarterly report also revealed a 12 percent increase in sales compared to the same period last year, totaling SR353.59 billion. Meanwhile, spending increased by 15 percent to SR 368.93 billion.
Finance Minister Mohammed Al-Jaadan said in December that the kingdom's annual budget for 2024 was based on “very conservative” estimates of oil revenues.
Despite this cautious approach, there was an 18 percent increase in oil revenues in the second quarter of 2024 compared to the same period last year, totaling SR 212.99 billion. In addition, non-oil revenues increased by 4 percent to SR 140.6 billion.
The growth in oil revenues can be attributed to the rise in oil prices over the past year. In the second quarter of 2024, the average oil price based on the closing number at the end of each month was around $76.69 per barrel, compared to $71.83 for the same period in 2023.
This rise in sales came despite production cuts by OPEC+ and further cuts by the kingdom, which reduced production to 9 million barrels per day.
Taxes on goods and services drive non-oil revenues
According to the ministry, goods and services taxes accounted for 50 percent of non-oil revenues totaling approximately SR70 billion.
The second largest share, categorized as Other Revenues, accounted for 20 percent and included revenue from various sources such as public government units, including the Saudi Central Bank, revenue from entities including advertising and port services, as well as administrative fees, fines, penalties and confiscations.
Saudi Finance Minister Mohammed Al-Jadaan said the kingdom's annual budget for 2024 was based on “very conservative” estimates of oil revenues. File/AFP
Other taxes accounted for 17 percent, or about SR24 billion, while income, profits and capital gains levies accounted for 9 percent, totaling SR12.65 billion. This significant contribution underscores the kingdom's efforts to diversify its sources of revenue beyond oil, reflecting effective fiscal reforms and a broader tax base.
Saudi Arabia is actively working to diversify its economy through investments in non-oil sectors such as tourism, entertainment and renewable energy. Initiatives such as Vision 2030 aim to reduce dependence on oil by promoting a more diverse and sustainable economic environment.
Expenses
Saudi Arabia's non-financial capital expenditure, often referred to as CAPEX, drove much of the growth in spending during this period.
This category saw a 53 percent increase to a total of SR66.41 billion and includes investments in physical assets such as buildings, machinery and infrastructure aimed at increasing the kingdom's capacity and capabilities.
In its December budget statement for fiscal year 2024, the ministry said that spending will increase in the coming years to accelerate the implementation of key programs essential to the goals of Saudi Vision 2030. The quarterly deficit therefore remains within expectations, reflecting prudent fiscal management.
Use of goods and services accounted for the highest percentage of 20 percent, according to the ministry's report, and grew by 19 percent during the period.
This category represents the total amount spent on the procurement of goods and services by the government for various purposes such as operational activities or resale. It reflects the government's consumption or investment in resources necessary for its operation, excluding any changes in stock levels.
The ministry's report said the deficit would be covered by borrowing.
Domestic debt accounted for 59 percent, or SR680.29 billion, of the total at the end of the period, while external borrowings accounted for the remaining 41 percent, totaling SR468.92 billion.
Compared to advanced economies and G20 countries, Saudi Arabia's public debt as a percentage of GDP remains relatively low. In addition, it is well supported by government reserves, providing a significant buffer against potential financial problems or economic downturns. This strengthens the fiscal stability of the kingdom and its ability to meet financial obligations.
