By Shatha Almasoudijana and Sallouum Ruba Alrashed
Saudi Arabia, which last month reported a surplus from its first quarterly budget surplus since the first quarter of 2019, is enforcing spending restrictions even as oil prices trade near their multi-year high.
Saudi Arabia’s finance ministry has started enforcing the spending cap regardless of oil price and income, Minister Mohammed Al-Jadaan said at the Financial Stability Conference on Thursday.
The government is working through the financial sustainability program to reduce exposure to external factors, including fluctuations in oil markets, by adopting financial rules that ensure financial viability and sustainable development, reflecting financial stability, a said Al-Jadaan.
These rules adopt new methodologies for determining spending ceilings in the medium term, he said.
The financial rules are based on estimating structural oil revenues which depend not only on future expectations, but also on average real historical revenues over a long period, and estimating non-oil revenues as a percentage of non-oil revenues. oil GDP to together form spending ceilings, the minister explained.
These rules will limit the fluctuation in spending and its multiple negative outcomes, he said.
The rules also include minimum and maximum limits for government reserves, so that surpluses are treated to increase government reserves and support development funds and the Public Investment Fund, or pay off part of the public debt. .
Saudi Arabia has encountered no problem issuing debt, even at the worst time of the COVID-19 pandemic, he said.
The credit rating was important not only for government and public debt, but also for cost reduction, the Saudi minister said.
Moody’s rating agency changed the Saudi government’s outlook from negative to stable earlier this month. The agency predicted that the Saudi economy would return to positive growth in 2021 and that the level of the current account would revert to a surplus as the budget deficit narrowed in 2021, accompanied by a reduction in the level of debt to medium. term.
The Kingdom’s budget turned into a surplus of SR 6.68 billion ($ 1.78 billion) in the third quarter of this year, compared to a deficit of SR 4.61 billion in the previous quarter and a deficit of SR 41 billion. SR in the third quarter of 2020, revealed the Saudi Ministry of Finance in its latest quarterly report.
Oil revenues increased 60% in the three months ending September compared to a year ago, reaching SR 148 billion, according to the ministry report.
Social spending fell 41% over the same period, while subsidies were cut by almost half, the data showed.
FIP, Private sector
Al Jadaan said the purpose of having reserves and investments with the Public Investment Fund is to give fiscal stability to government spending. are avoided, Al Jadaan added.
Speaking about the Kingdom’s other goals, he said Saudi Arabia‘s direction is clear to be a global logistics hub comprising rail and port networks, the minister said.
Ports are developing dramatically, previously wasted opportunities have been activated and a large number of ports have been assigned to different types of services, according to Al Jadaan.
âThere are great opportunities for the private sector,â he said.