Saudi Arabia has reported a first-quarter budget shortfall of 12.4 billion riyals ($3.30 billion), the Finance Ministry announced, citing elevated expenditure and diminished oil earnings. However, this figure represents a significant improvement from the deficit recorded in the final quarter.
The nation, which is embarking on ambitious projects to diminish its reliance on oil, has recalculated its financial requirements for the year, raising them to 138 billion riyals from an initial estimate of 23 billion dollars.
Q1 saw oil revenues totaling 181.922 billion riyals, a modest increase of 2% from the same quarter the previous year. Meanwhile, revenues from non-oil sectors experienced a more robust growth, rising by 9% compared to the same period.
Diversifying the economy away from oil remains a primary objective for the government, which has been actively promoting investments in tourism and bolstering the private sector.
Concurrently, government spending has escalated to 305.820 billion riyals in Q1, marking an 8% increase from the previous year. A significant portion of this expenditure, over 60%, is allocated for subsidies and social benefits.
The International Monetary Fund has observed that the average price of International Brent crude oil hovers around $83.50 for the year, while Saudi Arabia’s budget equilibrium requires a price of $96.2 per barrel.
‘Unless oil prices trend up more than expected, the deficit is likely to be more than the 2% of GDP budgeted,’ stated Justin Alexander, director at Khalij Economics and a Gulf analyst at GlobalSource Partners.
Debt levels have surged by 66 billion riyals, reaching a total of 1.12 trillion riyals, an increase from the 1.05 trillion riyals recorded.
‘The government has made a strategic decision to use debt for deficit financing for several years; this is a reasonable approach…providing the spending does help to grow and diversify the economy as intended,’ Alexander added.
The preceding quarter’s budget deficit stood at 37 billion riyals, with continuous cuts in oil production and declining prices impacting the revenue of the leading oil-exporting country.
‘The deficit is contained in Q1 of 2024, and the overall fiscal position should benefit from a higher average oil price from Q2,’ noted Monica Malik, chief economist at Abu Dhabi Commercial Bank.