Saudi Arabia, which announced last month a surplus in its first quarterly budget surplus since the first quarter of 2019, is applying restraints on spending even as oil prices are trading near multiyear
According to Minister Mohammed Al-Jadaan at the Financial Stability Conference on Thursday, the Saudi Ministry of Finance has started to apply the spending cap regardless of the oil price and revenues.
Saudi Arabia has faced no challenges in issuing debt even at the worst time of the COVID-19 pandemic, he said.
The credit rating was important not only for government and government debt, but also for cost reduction, the Saudi Minister said.
Credit rating agency Moody’s has changed early this month the outlook on the Saudi government from negative to stable. The agency predicted the Saudi economy will return to positive growth in 2021, and the current account level will return to a surplus as the fiscal deficit shrinks in 2021, accompanied by a reduction in the level of debt in the medium term.
The Kingdom’s budget turned to a surplus of SR6.68 billion ($1.78 billion) in the third quarter of this year, up from a deficit of SR4.61 billion in the previous quarter, and a deficit of SR41 billion in the third quarter of 2020, the Saudi Ministry of Finance revealed in its latest quarterly report.
Oil revenues went up by 60 percent in the three months ending Sept. from a year ago reaching SR148 billion, according to the ministry’s report.
Social spending fell down by 41 percent over the same period, while subsidies fell down by almost half, the data showed.
PIF, Private Sector
Al Jadaan said that the purpose of having reserves and investments with the Public Investment Fund was to give fiscal stability to government spending.There is a negative impact on the sovereign credit rating affecting the private sector, so the government is keen to ensure that these effects are avoided, Al Jadaan added.
Talking about the KIngdom’s other goals, he said that Saudi Arabia’s direction is clear about being a global logistics hub including rail and port networks, the minister said.
Ports are growing significantly, previously wasted opportunities have been activated and a large number of ports have been allocated to different types of services, according to Al Jadaan.
“There are very big opportunities for the private sector,” he said.
Saudi economy
Faisal Al Ibrahim, the minister of economy and planning, said at the conference that the sources of growth depend on economic diversification.
Al Ibrahim argued that this requires empowering, linking and attracting private sector investment to sectors that have been able to export products and services that are highly competitive and do not depend on the value added by oil.
With regard to the Saudi economy, he said that the Kingdom had entered a period of economic recovery compared to last year.
(Except for the headline, this story has not been edited by The Finance World staff and is published from a syndicated feed.)
