Riyadh: Saudi Arabia’s budget next year will be “expansionary but not significantly” and in line with plans to balance state finances by 2020, Finance Minister Mohammad Al Jadaan said.
“Where the expansion will come is from the efficiency,” Al Jadaan said in an interview in Jeddah on Tuesday. “So we are working on that — reducing a lot of the fat that is not necessary and then utilising that in more productive investments.”
The target for a balanced budget is central to the kingdom’s long-term plan to wean the economy off oil, which includes creating the world’s biggest sovereign wealth fund and privatising some state assets. The Finance Ministry reported this month that the first-quarter deficit narrowed on higher oil revenue, boosting efforts to repair public finances.
Deputy Crown Prince Mohammad Bin Salman is trying to transform the Saudi economy as the plunge in oil prices squeezes state coffers. The government initially implemented an austerity drive that included reducing subsidies and temporarily trimming the wage bill. That led to rare public grumbling among some citizens and more privately from companies reliant on state spending.
The government started preparing the 2018 budget in January, Al Jadaan said. The first draft should be ready in two months, he said.
The country is also shifting to quarterly reports on economy from annual to boost transparency as it implements the economic plan, dubbed Saudi Vision 2030. In December, the government said it planned to spend 890 billion riyals ($237 billion) in 2017, with revenue at 692 billion riyals and a full-year deficit of 198 billion riyals.
Austerity measures, combined with the drop in oil prices that prompted them, have caused the kingdom’s worst economic slowdown since the global financial crisis. There are plans to impose an excise tax on soda and tobacco from the second quarter of 2017 and a 5 per cent value-added tax in the first quarter of 2018 to boost government revenue.
The plan for the excise tax “is still on,” Al Jadaan said. “We are preparing the market, we are preparing participants and coordinating with other” Gulf Cooperation Council countries, he said.