Minister of Finance: Achieving Comprehensive Development and Providing New Job Opportunities for citizens Is the Government's Top Priority

Thursday 1444/5/14 - 2022/12/08
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Riyadh, Dec 8, 2022, SPA -- Minister of Finance Mohammed bin Abdullah Al-Jadaan affirmed that achieving comprehensive development, providing job opportunities and new businesses, and raising the quality of life of citizens and residents is the top priority for the Kingdom of Saudi Arabia's government.
This came in a press conference held by the Minister of Finance here today on the occasion of announcing the state's general budget for the fiscal year 1444/1445 Hijri (2023).
He said that the budget confirms the government's keenness to maintain financial sustainability, continue working to enhance the principle of transparency and disclosure, adopt consistent policies to confront global crises, and enable the private sector to drive economic growth in the medium term.
He stressed the government's determination during the next year and the medium term to continue its efforts to raise the efficiency of spending and financial control, as it aims to achieve comprehensive development at the levels of regions and sectors, as well as to develop promising sectors that contribute to achieving economic and social returns in the medium and long term, and to localize military industries, while continuing to implement programs and initiatives of the social support and protection system, as preliminary estimates for 2023 indicate a real GDP growth rate of 3.1%.
Al-Jadaan stated that the economic and financial reforms being witnessed by the Kingdom contributed to the ongoing acceleration of growth despite the various challenges and crises facing the economies of the world that affect the path of global economic growth and its future prospects, such as the food crisis, inflation, disruption of supply chains and geopolitical turmoil, highlighting the attention paid by the government to mitigate the economic and social impacts arising from these crises, through the proactive steps it has taken, as well as the economic and financial reform packages that were distinguished by balancing the requirements of increasing spending, ensuring the maintenance of financial stability and achieving financial sustainability, in order to support economic recovery, in addition to adopting numerous strategic projects and increasing appropriations for social protection programs, in addition to increasing strategic stocks of basic materials, and accelerating the implementation of some programs and projects to advance the realization of the Kingdom’s Vision 2030.
He also pointed out to the budget's expectations of a decrease in the inflation rate for 2023 to 2.1%, and it is expected to become normal in the medium term.
He explained that the partnership among government agencies contributed to many reforms in the process of preparing the state's general budget and raising the quality of its implementation, since the partnership with the private sector enhanced opportunities to enable it to be the main engine of economic growth, and the largest contributor to providing job opportunities for citizens.
He further said that the public debt balance is expected to reach 951 billion Saudi riyals (equivalent to 24.6% of GDP) in 2023, compared to 985 billion Saudi riyals (equivalent to 24.9% of GDP) for 2022, pointing out that it is expected continuing domestic and foreign borrowing operations with the aim of paying the principal due during 2023 and in the medium term, and taking advantage of the available opportunities according to market conditions to implement additional proactive financing operations to pay the principal dues for the coming years, and to finance some strategic projects, in addition to exploiting market opportunities to implement government alternative financing operations so to finance transformational spending for capital and infrastructure projects.
He also stated that it is estimated that the balance of government reserves will reach about 399 billion Saudi riyals by the end of 2023, as a result of strengthening the reserves with part of the surpluses in order to maintain safe levels of government reserves to enhance the government's financial position and its ability to deal with any external shocks.
Al-Jadaan went on saying that the recently issued budget statement reflects the government's policies in enhancing the level of financial disclosure and consolidating the principle of transparency on the performance of public finances in the Kingdom and its policies, through its publication of the quarterly reports and the semi-annual report on financial and economic performance, in addition to the preliminary statement.
Concerning growth engines in the medium term, the Minister of Finance stated that the efforts and developmental role of the private sector have been intensified, including large companies and medium and small enterprises, through several initiatives supporting the private sector, represented in raising the percentage of local content in major projects, developing the national industry, and stimulating the tourism sector and national exports.
He indicated that the economic improvement in the Kingdom made despite the challenges related to global supply chains, which were reflected in the prices of fuel and raw materials, yet, the levels of economic improvement continued to rise, supported by the improvement in demand conditions as a result of the recovery of commercial activity and the improvement of new business conditions.
He touched on the pivotal role of the National Investment Strategy, which aims to pump 12 trillion Saudi riyals into the national economy until 2030 to support the growth of the national economy, through the launch of the National Global Supply Chains Initiative and the issuance of the new investment system, as the strategy aims to strengthen the Kingdom’s position as an industrial strength and a global logistical hub, in addition to creating qualitative opportunities stimulating foreign investors.
The Minister of Finance also spoke about the role of economic enablers in support of the private sector, and the programs being carried out by the Public Investment Fund.
Regarding the launch of the national strategy for industry, he stated that it aims to reach an industrial economy that attracts investment, to contribute to achieving economic diversification, and developing domestic product and non-oil exports.
Then, he answered the journalists' questions.
In a question about the recent improvement in the level of the budget and that this is due to oil prices and not because of the government's efforts, the Minister of Finance explained that oil revenues have a role in this, stressing that the policies and structural reforms that took place during the past five years played an effective role in mitigating fluctuations in the level of government revenues, and that non-oil revenues had accounted for approximately 8.9% of the GDP in 2016, and we will end this year approximately at the level of 16.9%, as oil revenues had covered 90% of the budget in 2015-2016 and decreased to 65%, pointing out that oil revenues had role, however, structural reforms have a very important and growing role as with the growth of the economy, non-oil revenues grow, covering a larger part of the budget.
He also pointed out that the government made distinguished initiatives to raise the level of spending efficiency and allocate spending on strategic priorities that enable the growth of the economy and the private sector, in addition to creating multiple business opportunities for entrepreneurs, explaining that more than 270,000 enterprises were established during 2202, which came due to the presence of business opportunities that were created because of these initiatives, saying that the government works with great focus on directing expenditures to projects and strategies that achieve returns and better service for citizens, as well as results and opportunities for the private sector and jobs.
Regarding budget surpluses and whether they will contribute to supporting citizens, the Minister Al-Jadaan stressed that what is spent on the budget is support for the citizen and the development of the economy, and the evidence was during the shocks that the world faced and how the government dealt with them, indicating that the strategies and implementation of empowerment and improvements that are made in government services affect every citizen and the opportunities that are created for entrepreneurs benefit citizens directly and contribute to in providing jobs.
With regard to the value-added tax, he said, "If we notice what happened during the previous 9 years, and because of the large fluctuations in revenues, the government was forced to use a large stock of reserves that it had to bridge the budget deficit by using a trillion Saudi riyals for that and borrowing 985 billion Saudi riyals during the same period for the same reason, and also to support and finance the private sector, so the use of two trillion Saudi riyals over a period of 9 years that was financially difficult, yet the government had succeeded to manage it with high efficiency and a surplus for one year is achieved, stressing that it is not wise to change financial policies and the world witnesses great fluctuations and we are part of it, as it is not wise to change policies in a hurry, until we make sure that we have the strong economic base and provide greater reserves to reconsider fiscal policies, whether tax or otherwise.
Al-Jadaan also explained that unemployment started in a low trend, and this is a result of the efforts being made by the government and joint action with the private sector, and we witnessed an accelerated decline in the level of unemployment, so the unemployment rate at the end of 2021 was 11%, and in the second quarter it decreased to 5.8% at the level of the Kingdom and at the level of Saudis 9.7%, which is the lowest percentage in the past 20 years.
The Minister of Finance expressed his optimism about the ability of the Saudi economy to provide more jobs and business opportunities, and the efforts made by the Public Investment Fund, as the fund’s subsidiaries provided 500,000 jobs due to the focus on Saudis, highlighting the great role played by the National Development Fund in supporting and expanding the private sector to provide more jobs.
He stated that the estimates of the International Monetary Fund indicate that inflation reached 8.8% and will decrease in the next year to 6.8% worldwide, and that the reason for the lack of inflation in the Kingdom, which is estimated at 2.6%, is due to the early government intervention, and the main factor in the high levels of inflation was the energy prices, but the government successfully managed over the past year to stop inflation in energy prices and curb the rise in inflation in the Kingdom.
He pointed out that the Kingdom has taken proactive strategies, especially with regard to food, as the food security strategy has invested billions in it, and pumped billions to support the private sector to raise food stocks, and thus inflation has been curbed.
The Minister of Finance also explained that the element that significantly helped prevent global inflation from reaching the Kingdom was the Saudi riyal's correlation with the US dollar and the high price of the Saudi riyal and the US dollar with other currencies, as the exchange rate greatly reduced the impact of this global inflation on the Kingdom.
Al-Jadaan affirmed that the government continues to work with the private sector, including supporting livestock breeders, poultry producers and importers, and it intervened this year by developing initiatives that contribute to providing sufficient strategic stocks, and in the event of low prices, the trader shall be compensated.
With regard to growth levels, the Minister of Finance explained that the Kingdom's Vision 2030 depends mainly on diversifying the economic base, and this means not continuing with one source of income, stating that oil is a blessing from Allah the Almighty and it will be well exploited, however its prices are volatile, and therefore the Kingdom's Vision came to diversify the economic base so as not to be confined to one commodity.
Moreover, he stated that what is being monitored on a daily basis is the gross domestic product of private sector activity, as it reflects the diversity of the economic base, saying that the private sector will grow by 5.9%, expecting ongoing growth in the medium term, indicating that the reason for raising the gross domestic product for this year are two things: the oil domestic product by 19 percent % and the GDP of the private sector's activity by 5.9%.
He also cited the importance of public finances being able to deal with shocks, as we saw that in 2020 during the Coronavirus pandemic, as well as dealing with oil price shocks in the years preceded the pandemic and we were able to deal with them with high flexibility, and we will continue to do so, benefiting from the fact that the surpluses are usually allocated at the end of the year and the main component will go to government reserves to enhance them and shall be decided by a final decision in the first quarter by the government in the Finance Committee, while a part will go to the National Development Funds and the Public Investment Fund, as well as for the acceleration of strategic initiatives.
Regarding the situation at the regional level, the Minister of Finance stated that the Kingdom is part of the world and the region and has interests in it, highlighting what is related to the renewal of deposits for Pakistan, Egypt and Turkey, and the investments of the Public Investment Fund in many countries.
With regard to spending in the current period and what it is targeting, Al-Jadaan stressed that the focus will be on financing strategies and projects, including medical services, education, road maintenance and operation.
On the aspect of privatization, he stated that privatization is to enable the private sector to perform better, as it has the ability to carry out projects in a dynamic manner at a faster speed and at a lower cost, as projects are viewed according to these criteria, and the optimal value that benefits the public money from assigning the private sector to carry out this project or this service.
He explained that the privatization strategy is about to be completed, as during the past two years, the main work has been achieved, which is the legislative work, laws, rules, regulations and system, nevertheless, the privatization process went on and we witnessed the successes of partnership between the government and the private sector, signed in various fields, including ports, desalination, water and sanitation, health sector and logistics services and others.
Al-Jadaan also stated that it is expected that the lists of projects that have been allocated will be published in the first quarter of 2023, amounting to 200 projects at different levels.
Regarding local content, the Minister of Finance explained that it depends on government policies that began with amending the regulation of government competitions and procurement, setting minimum limits for local content, and establishing the Local Content and Government Procurement Authority (LCGPA) to work on determining what purchases, contracts, competitions, and services are available in the local private sector, in a way committing the contractors with contracts with the government for government procurement to providing them from local factories or local service providers.
05:43 LOCAL TIME 02:43 GMT