Ministry of Finance's Statement on the State's General Budget 17 Riyadh

Wednesday 1439/4/2 - 2017/12/20
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a.Revenues
Since 2016, a number of measures have been implemented to boost the growth of revenues over the medium term and diversify the revenue mix. These measures include the introduction of value-added tax and expat levy and the adjustment of energy prices to be aligned with reference energy prices. Additionally, the government aims for the structural and continuous development of revenues to be the primary source of public finance spending and lead to deficit reduction.
Estimates indicate that total revenues will reach SAR 783 billion in 2018, increasing by 12.6% year-on-year. They are also expected to reach SAR 909 billion in 2020 with an average annual growth rate of 9.3%. In addition, taxes are forecast to reach SAR 142 billion at a growth rate of 46% in 2018 year-on-year, reaching SAR 189 billion in 2020. Taxes on Income, Profit and Capital Gains are projected to amount to SAR 15 billion in 2018 at a growth rate of 10.4% year-on-year, reaching SAR 18 billion in 2020. Meanwhile, Taxes on Goods and Services are estimated at SAR 85 billion, rising by 82% year-on-year to SAR 124 billion in 2020. This comes as a result of the implementation of some economic reforms, such as value-added tax, which are projected to generate revenues of SAR 23 billion in 2018. Revenues from excise tax are expected to yield SAR 9 billion in 2018, while expat levy revenues are projected to amount to SAR 22 billion and those from expat dependents fees to SAR 6 billion in 2018.
Taxes on Trade and Transactions are projected to reach SAR 25 billion, up 17% year-on-year and reach SAR 28 billion by 2020. This growth is attributed to the implementation of certain reforms related to customs revenues, such as the re-imposition of customs duties on 193 goods and the implementation of post-clearance auditing. Other Taxes (including Zakat) are projected to reach SAR 17 billion in 2018, up by 10.8% year-on-year, reaching SAR 20 billion by 2020.
Other Revenues (including oil revenues) are expected to reach SAR 641 billion in 2018, representing a 7% increase year-on-year, increasing to SAR 720 billion in 2020. Additionally, estimates indicate that oil revenues, including the financial impact of energy price adjustments, will amount to SAR 492 billion in 2018, a 11.8% increase year-on-year. It is worth noting that the energy price adjustment plan has been revised so as to carry out the implementation more gradually, taking into consideration the importance of driving economic activity at higher rates.
b.Expenses
2018 budget comes amid the government's aim to establish a clear medium-term spending framework in line with the strategic objectives of the Saudi Vision 2030 Programs and to set spending levels based on a policy that strikes balance between the objective of cutting budget deficit so that public debt levels are not in excess of 30% of nominal GDP and the objective of reinforcing economic activity by directing government spending in a manner that supports the economic vision and targeted strategic plans. Government spending, which is considered to be one of the main drivers of the economy, accounts for 36% of nominal GDP in 2017. Total expenditure in 2018 will be SAR 978 billion, up 5.6% over the preceding year. This increase is due to the expanded spending on the initiatives of Vision 2030 programs.
·OPEX
The medium-term fiscal policy aims to prioritize initiative that have social and economic returns, such as the private sector stimulus packages, Citizen Account Program, and Saudi Vision 2030 Realization Programs. Total operational expenses for 2018 are estimated at SAR 773 billion or 79% of total spending, 3.6% over operational expenses of the current year owing to the implementation of numerous initiatives aimed at increasing the efficiency of spending. Compensation of employees is expected to account for 44.8% of the total expenditure estimated at SAR 438 billion, approximately equal to the actual levels of the current year. In addition, ratios of ‘Use of Goods and Services’ and ‘Social Benefits’ to total expenses have constituted 14.6% and 6.7%, respectively, as the spending envelope for Use of Goods and Services rises by 6%. However, spending on subsidies is projected to rise by 102% to SAR 14 billion, as a result of executing some programs, such as stimulus packages directed toward the private sector with a view to enhancing and increasing its participation, in addition to the industrial sector support program. Further, Social Benefits expenses are expected to increase by 48.1%, motivated by the prospect of allowances being paid for the Citizen Account Program in 2018, which are estimated to amount to SAR 32.4 billion. Financing Expenses are estimated to rise by 57.1% compared to 2017, led by the increase of prospective security issuances to finance the budget.
As shown in the table above, the average growth of operational expenses during the period 2018-2020 stands at 3.3%, driven by increased spending on Social Benefits - the result of persistent increases in spending on the Citizen Account Program - and the growth of spending on financing costs resulting from rises in the volume of issuances, with lower growth rates for the remaining operational expenses.
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16:12 LOCAL TIME 13:12 GMT