The Finance Ministry said Saudi Arabia plans to cut spending by more than 7% next year, as the region’s largest oil producer tries to reduce budget deficit amid the coronovirus epidemic and falling oil prices .
The state expects a deficit of $ 79.4 billion this year, according to a government budget statement released on Tuesday estimated at an estimated 12% of the country’s GDP. By reducing spending to $ 264 billion next year, it expects to bring its deficit to 4.9% of the country’s economic output.
Finance Minister Mohammed Al-Jadan said a breakdown of oil and non-oil revenues was not offered in the budget for the first time, as state oil giant Aramco floated a float of its shares in the Saudi stock market last year . Disclosing revenue forecasts could result in billions of dollars in dividends, with the state-owned company continuing to pay shareholders despite a drop in revenue. Almost all of the dividend money goes to the majority owner of the company, the Saudi government, to help cover state spending.
Saudi Arabia has been struggling with a budget deficit since the first fall in oil prices in 2014. Over the years it has increased public expenditure, drawing from strong fiscal reserves to reduce the effects of austerity such as new tax and subsidy cuts. With crude prices dropping by nearly $ 40 a barrel, the state has shifted its shift away from spending and taken more drastic measures, raising its value-added tax to 15%, due to demand for virus cuts. And has set aside allowances for state personnel.
Even coronovirus vaccine test results have raised oil prices by $ 50, raising hopes of an economic recovery, with state planned 2021 budget cuts indicating petrostates in the region still balance their budgets Will struggle to do because prices remain depressed.
According to the International Monetary Fund, the country’s oil price for next year’s budget is $ 67.9 per barrel, far above current selling prices. The state’s revenue is only expected to increase by some 10% next year to $ 226 billion.
Nevertheless, al-Jadan stated in a cautiously optimistic tone that the country’s flush reserves allow it to “face the crises facing the world” and that “the pace of development will accelerate with the demise of the epidemic.” , Especially with adoption. Vaccine, and things will return to normal. ”According to the IMF, the Finance Ministry projects GDP to grow 3.2% next year, after the epidemic has shrunk by 5.4%.
The annual Saudi budget is closely watched as it provides one of the clearest vision indicators of whether the state is on track with its Vision 2030 plans, the Crown Prince Mohammed bin Salman’s blueprint for the economy by building tourism, entertainment and mega To remove from oil. Projects like Neum, a future city in the desert.
Prince Mohammed said on Tuesday that the state is moving ahead with its Vision 2030 projects and tapping public investment funds to pump billions into the economy and create jobs. According to the country’s statistics agency, unemployment in the state exceeded 15% this year.
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