RIYADH: Saudi Arabia recorded a budget deficit of SR15.34 billion ($4.09 billion) in the second quarter of 2024, bringing the year's 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 is experiencing a lower-than-expected budget deficit for the year to date, suggesting a change 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 revenue compared to the same period last year, totaling SR353.59 billion. At the same time, expenses rose by 15 percent and reached 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, oil revenues increased by 18 percent 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 and reached SR 140.6 billion.
The increase in oil revenue can be attributed to the increase in crude oil prices over the past year. In the second quarter of 2024, the average crude oil price, based on the final figure at the end of each month, was around $76.69 per barrel, compared to $71.83 for the same period in 2023.
This revenue increase came despite production cuts imposed by OPEC+ and further reductions from the Kingdom, which reduced production to 9 million barrels per day.
Taxes on goods and services drive non-oil revenues
According to the ministry, taxes on goods and services made up 50 percent of non-oil revenues, a total of about SR 70 billion.
The second largest share, categorized as Other Revenue, accounted for 20 percent and included revenue from various sources such as public authorities, including the Saudi Central Bank, sales from entities including advertising and port services, as well as administrative fees, fines, penalties and forfeitures.
Saudi Finance Minister Mohammed Al-Jadaan said the kingdom's 2024 annual budget was based on “very conservative” estimates of oil revenues. File/AFP
Other taxes made up 17 percent, or about SR 24 billion, while taxes on income, profits and capital gains accounted for 9 percent, a total of SR 12.65 billion. This significant contribution underscores the Kingdom's efforts to diversify its sources of income beyond oil, reflecting effective tax reforms and a broader tax base.
Saudi Arabia is actively working to diversify its economy through investment 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 diverse and sustainable economic landscape.
Expenditure
Saudi Arabia's non-financial investments, often referred to as CAPEX, drove much of the spending increase during this period.
This category increased by 53 percent, totaling SR 66.41 billion, and it includes investments in physical assets such as buildings, machinery and infrastructure, aimed at improving the Kingdom's capabilities and capacity.
The ministry had stated in its budget statement in December for fiscal year 2024 that there will be increased spending in the coming years to speed up the implementation of key programs critical to the goals of Saudi Vision 2030. Therefore, the quarterly deficit remains within expectations, reflecting prudent fiscal management .
Utilization of goods and services made up the highest proportion at 20 percent according to the department's report and increased by 19 percent during this period.
This category represents the total amount spent on acquiring 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 operations, excluding any changes in inventory levels.
The department's report states that the deficit will be covered by borrowing.
The domestic debt made up 59 percent, or SR 680.29 billion, of the total debt at the end of the period, while external borrowing made up the remaining 41 percent, a total of SR 468.92 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 challenges or economic downturns. This strengthens the Kingdom's fiscal stability and its ability to meet financial commitments.
