RIYADH: Saudi Arabia posted a budget deficit of SR15.34 billion ($4.09 billion) in the second quarter of 2024, bringing the deficit in the first half of the year to 35 percent of the annual forecast set by the Ministry of Finance.
The latest data indicates that the Kingdom faces a smaller-than-expected budget deficit for the year to date, indicating a change in fiscal management or higher-than-anticipated revenues in the first half of 2024.
The ministry's quarterly performance report also revealed a 12 percent increase in revenue over the same period last year, totaling SR 353.59 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 is based on “very conservative” estimates of oil revenues.
Despite this cautious approach, the second quarter of 2024 saw an 18% increase in oil revenues compared to the same period last year, totaling SR 212.99 billion. In addition, non-oil receipts increased by 4% to SR 140.6 billion.
The increase in oil revenues 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 figure at the end of each month, was about $76.69 per barrel, compared to $71.83 for the same period in 2023.
This rise in revenue came despite production cuts imposed by OPEC+ and further cuts by the Kingdom, which reduced production to 9 million barrels per day.
Taxes on goods and services generate non-oil revenue
According to the ministry, taxes on goods and services constituted 50 percent of non-oil revenues, amounting to approximately SR 70 billion.
The second largest share, classified as Other income, was 20% and included income from various sources such as public government units, including the Saudi Central Bank, sales from entities, including advertising and port services, and taxes administrative, fines, sanctions and confiscations.
Saudi Finance Minister Mohammed Al-Jadaan said the Kingdom's annual budget for 2024 is based on “very conservative” estimates of oil revenues. File/AFP
Other taxes accounted for 17 percent, or about SR24 billion, while income, profit and capital gains taxes accounted for 9 percent, totaling SR12.65 billion. This substantial contribution underscores the Kingdom's efforts to diversify its revenue sources beyond oil, reflecting effective fiscal reforms and a broader 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 dependence on oil by promoting a more diverse and sustainable economic landscape.
Costs
Saudi Arabia's non-financial capital expenditure, often referred to as CAPEX, drove much of the increase in spending during this period.
This category saw a 53% increase, totaling SR 66.41 billion, and includes investments in physical assets such as buildings, machinery and infrastructure aimed at improving the Kingdom's capacity and capabilities.
The ministry had indicated in its December budget statement for fiscal year 2024 that there would be higher spending in the coming years to accelerate the implementation of key programs vital to Saudi Vision 2030 goals. Therefore, the quarterly deficit remains within expectations, reflecting prudent fiscal management.
Workers' compensation accounted for the largest share, at 38 percent according to the ministry's report, and was up 4 percent over the period. The use of goods and services came in second, accounting for a 20% share and up 19% from the same quarter last year.
This category represents the total amount spent on the purchase 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 needed for its operations, excluding any changes in stock levels.
The ministry's report indicated that 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 borrowing made up 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 backed by government reserves, providing a significant buffer against potential financial challenges or economic downturns. This strengthens the Kingdom's fiscal stability and its ability to meet its financial obligations.
