Time: September 16, 2018
Talat Zaki Hafiz
The Ministry of Finance has published its second quarter budget performance report for this year, which included a summary of many financial indicators and key data that reflects the government’s commitment to transparency and fiscal disclosure.
The fiscal indicators of Q2 showed total revenues amounted to approximately SR274 billion ($73 billion), an increase of 67 percent year-on-year. It is worth noting that non-oil revenues have reached SR89.4 billion, up 42 percent on last year, which means that the government is continuing to focus its attention on growing such revenues and, by so doing, will gradually decrease its dependence on oil.
The report also showed that the total expenditures in Q2 of this year were approximately SR281 billion, an increase of 34 percent. This increase is due to the government’s continued support for sectors of social importance, such as education, health care and social development, which accounted for 42 percent of spending in the first half of this year.
Similarly, the half-year results made for good reading, as the total revenues reached approximately SR440 billion, up 43 percent, while total expenditures were SR481.5 billion, an increase of 26 percent, due to the stretch in spending on social and educational services for Saudi citizens. The first-half results showed the budget deficit amounting to SR41.7 billion.
Public debt has also increased from SR443 billion at the beginning of 2018 to SR536 billion by the end of Q2, which was financed by a mix of current account, internal and external borrowing.
Finance Minister Mohammed Al-Jadaan commented on the results by saying: “The fiscal figures announced for 2018 Q2 reflect the improvement in the performance of public finances, which will lead us to continue our reform plans aimed at economic diversification and achieving fiscal sustainability.”
He also assured that the Ministry of Finance is working side-by-side with other government agencies to harmonize policies and measures in support of the Kingdom’s macroeconomic stimulus and to achieve the objectives of the fiscal balance program. He added that the improvement in fiscal performance was also accompanied by an improvement in economic performance. Real GDP grew by 1.2 percent in the first quarter of this year, with the non-oil sector growing by 1.6 percent.
Finally, Al-Jadaan pointed out that the initial economic indicators show a continued improvement in the economic activity in the second quarter of this year, especially in the area of private consumption, as evidenced by an increase in cash sales and cash withdrawals during the period. Private investment performance has also seen good progress. In addition, private credit registered positive growth for the first time since the first quarter of 2017. These indicators provide a positive view for the continued improvement in GDP performance for the second quarter, as supported by improved levels of government investment and operating expenditure, as well as the recovery of world oil markets.
To conclude, despite the budget deficit shown in the report for the first half of this year, the financial results are still strong and promising for the rest of the year.
Talat Zaki Hafiz is an economist and financial analyst.