The 2013 budget for the government of Saudi Arabia was approved December 29, 2012 by the cabinet under the chairmanship of King Abdullah. Spending in 2013 will rise 19 percent from SR 690 billion to SR 820 billion ($219B) and revenues are expected to jump from SR 702 billion to SR 829 billion. The 2013 Saudi budget was discussed in an analysis by Jadwa Investment in Riyadh (published separately by SUSRIS) which noted the highlights:
- A surplus of SR9 billion ($2.4 billion) was projected, based on revenues of SR829 billion and expenditure of SR820 billion. This is the second consecutive year since 2008 that the Kingdom has budgeted for a surplus. Education and healthcare remain the focus of government spending, accounting for 37 percent of total spending.
- The budget highlights again the government’s intention to continue to stimulate the economy. Budgeted investment spending, raised by 28 percent to an all-time high of SR285 billion, will support healthy economic growth and provide encouragement and opportunities for the private sector at a time of global and regional uncertainty. While revenue projection is less conservative than in previous years, but in the event of a shortfall in revenues, any deficit can be financed comfortably by drawing from SAMA’s huge stock of foreign assets, which stood at $635 billion at the end of November.
- A budget surplus of SR386 billion was recorded in 2012 (Jadwa: SR341 billion), compared to a budgeted surplus of SR12 billion. The surplus was the second largest on record, after 2008 of SR580.9 billion. Total revenues were a record high of SR1.24 trillion (Jadwa: SR1.19 trillion) and total spending was also at an all-time high, of SR853 billion (Jadwa: SR847 billion). Spending grew at 3.2 percent year-on-year, a moderate rate compared to the previous two years. This was expected as it came in addition to a massive 26.4 percent expenditures growth last year which was mostly allocated to current spending.
- Preliminary economic data show that 2012 was a healthy year for the economy with real GDP growth of 6.8 percent. Non-oil private growth maintained a strong growth of 7.5 percent year-on -year, with construction and transport and communications sectors expanding at double-digit rates. The budget announcement also showed another revision to the 2011real GDP growth from 7 percent to 8.5 percent, the highest growth since 1979.Very high oil export revenues pushed the current account surplus to an all-time high of $178.5 billion.
We estimate that a price of $66 per barrel for Saudi export crude (around $70 per barrel for Brent) and production of 9.6 million barrels per day are consistent with the revenue projection contained in the budget. We expect both revenues and expenditures to be above the budgeted level and forecast a budget surplus of SR177 billion (6.3 percent of GDP) based on oil price of $104 per barrel for Brent.
This SUSRIS Special Report provides the Saudi Press Agency’s announcement of the budget approval including discussion of key elements and comments provided by Minister of Finance Dr. Ibrahim Al-Assaf.
Saudi Arabia Announces 2013 Budget
Saudi Press Agency, Riyadh
December 30, 2012
Dr. Ibrahim bin Abdulaziz Al-Assaf, Minister of Finance, said that the chairmanship of the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud of the cabinet session which approved the state’s budget yesterday after being discharged from hospital is a good omen for our homeland.
In an interview with the Saudi Television on the occasion of the issuance the state’s budget for the new fiscal year 1434/1435H, Al-Assaf said that the new budget came as an extension of previous developmental plans, focusing on the vital sectors of the national economy including education, health, infrastructure and social services and strengthening financial institutions. We witnessed large increases in these vital sectors, he commented.
The minister added that there is a significant growth in education spending. Although the size of previous expenditures on education was high but this year it was higher. In fact, next year it will rise at a rate of 21% in comparison with the current year. The education will form 25% of government spending, considered among the highest in the world. Similar highs will be seen on the health sector and others.
Al-Assaf added that the highest sector in the growth rate, not in size, is the municipal sector, pointing out that there are dozens of municipalities in the Kingdom providing direct services to citizens. Therefore, the appropriations of the municipal services, including asphalting, flood fighting and expressroad exits were increased.
He attributed the 37% volume of spending on education, health and social services worth SR304,000,000,000 to the importance of these sectors. “Education is the basis of investment in any country, and investment in human resources is the permanent investment which has continuing outcomes,” Al-Assaf said.
Minister of Finance expressed optimism that the country started to see the results of education outputs, including the graduates of Saudi universities, other universities and the Custodian of the Two Holy Mosques scholarship program and similar programs which will enhance the march of growth in the Kingdom.
With regard to diversification of non-oil income sources, Dr. Assaf asserted that the petroleum sector is still the dominant sector in terms of the state’s revenues, yielding around 90% of the total income. Sometimes this percentage is less, depending on the size oil revenues, he said. On the other hand, other revenues are growing, ranging from 10 – 12%, and considered among the highest compared to other oil exporters. However, oil revenues remain the dominent source of income, he stated.
The Minister of Finance revealed that efforts are being exerted to increase non-oil revenues. On social insurance, he said all Zakat (alms) revenues were allocated for that purpose together with government subsidies.
Quoting the Statistics and Information Department figures, Dr. Assaf added that the private sector’s contribution to the national economy surges year after year to reach a record high of more than 50% this year.
He said the oil sector fell by 5.5%, noting that the private sector contributes 58% to the national economy size, noting that the Saudi private sector size is bigger that the other Arab economies.
He said his Ministry follows conservative policies in terms of oil revenue estimates so as to be on the safe side. However, there is surplus as you see, he said.
In response to a question on reliance on oil revenues, Al-Assaf said oil will continue to constitute a vital source of income as it is an integral part of world energy sources even though other sources were brought to operation. This never means that we are going to reckon on it forever, he commented. Asked whether the Kingdom is satisfied over the diversification of the economic base, Al-Assaf said nobody would be satisfied even if the growth rate is the highest in the world.
By the way, Saudi growth rate this year is among the highest in the world, saying that the 6% or 7% growth rate in the current circumstances was good, he said.
Al-Assaf said the work is not only through the financial policies but also through investment in the infrastructure, human resoruces, and others. According to continuing reforms, Saudi Arabia is now one of the main stations foreign investors are resting while maneuvering for investment in the world.
Asked about how the budget surplus could be appropriated, Al-Assaf said it usually goes to replenish the ongoing cost of some projects which were approved in previous years.
The surplus is dealt with by the Saudi Arabian Monetrary Fund which invests, with the utmost professionalism, in foreign portfolios, noting that this year’s surplus will bring to around SR1 trillion or a bit more.
However, some money could be allocated for specific projects, he said, citing the housing project and transport projects, including Riyadh underground.
He cited many achievements of other sectors, citing the education, sanitation, health and other services.
He cited the Custodian of the Two Holy Mosques as asking him and the Minister of Health together to increase the number of hospitals in the Kingdom to meet the increasing demand.
To dash out the worries of economists on the costs of operation and maintenace, he confirmed that his ministry is taking care of allocating money for each project and its future operation and maintenace expenditure.
On the State’s debt, he said the Kingdom is running its debt with the most possible professionalism, noting that the situation is good and satisfying.
He said Saudi Arabia was able to gradually get rid of state securities with bonds written to the order of specific governmental authorities, e.g. civil aviation and others.
He described the diversification of investment map in the Kingdom as very good, noting that SAMA is the one to manage these investments.
He defended the policy linking the Saudi Riyal with U.S. dollar as helping the Kingdom very much according to testimonies of international institutions, defying allegations that such linkage has caused increase of prices of imported goods and stating that other reasons and circumstances like drought have caused the price hikes.
He explained why the budget of one university is higher or less than others, citing the number students, staff members and projects under construction or not yet started.
In conclusion, he expressed optimism that the state budget would be positively reflected on all sectors that serve the citizens and contribute to the boost of development.
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