Saudi Arabia believes its economy can decouple so much from oil that crude prices soon won’t be a decisive factor in shaping fiscal policy.
“Our aim is within the period to 2030 we don’t even look at the oil price,” Saudi Finance Minister Mohammed Al Jadaan said on Wednesday at the Financial Sector Conference in Riyadh.
For now, the country is far from achieving that goal as oil still provides the bulk of government revenue and largely dictates the performance of the economy.
But since the kingdom unveiled its blueprint for diversifying the economy, called “Vision 2030”, non-oil revenue went from covering about 10 per cent of budget spending to more than a third, according to Al Jadaan. That “means our dependence on oil revenues becomes much less and with time it will be a lot less”, he said.
The world’s top oil exporter has long relied on the flow of petrodollars into the government’s coffers to power spending on job creation and costly infrastructure. In 2022, it had the highest annual income from oil sales abroad during Mohammed bin Salman’s time as crown prince.
The windfall, alongside higher production volumes, made Saudi Arabia’s economy the fastest growing in the Group of 20 last year and helped it run a fiscal surplus for the first time in nearly a decade.
In a change of tack, authorities are now trying to break the link with crude by keeping spending in check and using their energy proceeds to accelerate projects that contribute to weaning the economy off a reliance on oil.
Al Jadaan’s comments signal the approach remains in place even as oil endures a bumpy year, whipsawed by aggressive monetary tightening from the US Federal Reserve and optimism around China’s demand recovery. Further gains may be constrained in the near term.
“Our aim is for sustainable and predictable public investment and expenditure regardless of the oil prices,” Al Jadaan said. “And we have the buffers and the reserves and we have the ability to manage that.”
With crude prices trading near $80 per barrel after skyrocketing into triple digits for parts of 2022, Saudi oil revenues fell for six straight months to end last year. The proceeds reached nearly $326 billion in the whole of 2022.
“Oil revenues are very important to us as they are a catalyst to continue to invest in our vision,” Al Jadaan said. “But it should not be a question of stopping what we are doing just because the oil price is low.”