Custodian of the Two Holy Mosques King Salman announced on Monday that the annual general budget of SR513.8 billion, with expenditures budgeted at SR840 billion and fiscal shortfall projected at SR326.2 billion, representing the beginning of an integrated and comprehensive working program to build a strong economy.
Unveiling the budget for the fiscal year of 1437-38 (2016) at the weekly session of the Council of Ministers at Al-Yamama Palace, the King said the economy is strong and capable to meet the challenges despite a sharp fall in oil prices and a slow global growth.
“The new budget will boost public spending and will further bolster the relations between the public and private sectors,” the King said while calling for reviewing the government subsidy system, the Saudi Press Agency reported.
The King noted that the budget comes in the wake of a drop in global oil price, and regional and global economic and financial challenges, resulting in a slow global economic growth, coupled with instability in some of the neighboring countries.
“We have instructed the concerned officials to take into consideration of this, and to give priority to complete the massive development projects, for which allocations have been made in previous budgets, and they are under various phases of implementation.
“We have directed the Council of Economic and Development Affairs to work on launching economic and financial reforms and a comprehensive restructuring. This budget represents the beginning of an integrated and comprehensive working program to build a strong economy based on strong foundations with a focus on diversifying sources of income.
“Through this, the savings would grow, job opportunities would increase, and partnership between the public and private sectors will be strengthened with continuing implementation of the development and service projects and upgrading various government services,” King Salman said.
The King also underscored the need for improving the efficiency of public spending, and review the government subsidy system with a gradual implementation to achieve efficiency in using the resources and curbing wastage.
He stressed that this should be done by reducing the negative impact on citizens with medium and limited income, and increasing competitiveness of the business sector.
King Salman also emphasized that it is the duty of government officials to accomplish their mission in serving the citizens in the best manner, saying “we don’t accept any negligence in this respect.”
He also directed to continue reviewing the systems for the monitoring agencies so as to strengthen their efficiency and work performance, in a way protecting the public wealth and make defaulters accountable for it.
The King also underscored to maintain the nation’s security and stability to continue the march of growth and development.
Analysis of the budget shows that education and training received a high allocation of SR191.659 billion, followed by health and social development with an allocation of SR104.864 billion.
Other allocations included municipality services (SR21.246 billion), military and security services (SR213.367 billion), infrastructure and transportation (SR23.903 billion), economic resources (SR78.121 billion), public administration (SR23.840 billion), and budget support provision (SR183 billion).
Due to the recent excessive volatility of oil prices and to address potentially declining revenues, a budget support provision of SR183 billion has been established to offer increased flexibility to redirect capital expenditures and operating expenditures on both ongoing and new projects according to national developmental priorities and to meet any emerging expenditure needs in line with mechanisms and procedures of relevant royal decrees, said the Finance Ministry in a press release.
In addition, government development funds (Saudi Industrial Development Fund, Saudi Fund for Agricultural Development, Real Estate Development Fund and the Saudi Credit and Saving Bank) are expected to continue delivering on their respective roles in financing different development projects by more than SR49.9 billion.
The budget for the next fiscal year 1437/1438 (2016) is adopted in light of very low oil prices, as average rates for 2015 declined by more than 45 percent from the average of 2014 and continued to decline into 11-year record low in the last few weeks.
The budget also comes amid challenging international and regional economic and financial conditions, namely a global economic slowdown in growth.
Based on the directives of Custodian of the Two Holy Mosques King Salman to conduct comprehensive economic, fiscal, and structural reforms and to work on strengthening public finances, enhancing sustainability over the medium and long terms and continuing to adopt necessary development projects and services for economic growth, the ministry announced to take a number of measures.
It plans to review the prices of subsidized power and fuel as part of new measures. The Finance Ministry also said it is considering plans to raise charges on public services and apply value-added tax (VAT) in cooperation with other Gulf Arab nations.
Fiscal management will be enhanced by establishing a public finance unit in the Ministry of Finance responsible for setting a budget ceiling by adopting a five medium-term expenditure framework (three years)
A unit will be established in the Ministry of Finance for public debt management. It will be responsible for developing and overseeing the public debt and financing strategy and strengthening the Kingdom’s ability to borrow both domestically and internationally; thus contributing to the market for sukuk and local bonds.
Capital spending will be optimized, and government projects will be reviewed.
Recurring expenditures, especially wages, salaries, allowances and the like, which amounted to SR450 billion, exceeding 50 percent of the approved budget expenses will be curtailed.
In the next five years, a range of sectors and economic activities will be privatized and legislative, regulatory and bureaucratic obstacles in the private sector will be overcome.
Investments will be made in development projects and programs that serve citizens directly, such as education, health, security, social and municipal services, water and sanitation, electricity, roads, electronic transactions, scientific research, and all that improves the citizens’ quality of life.
In fiscal year 2015, total revenue is estimated at SR608 billion, with an estimated decline of 15 percent compared to the budgeted revenues.
The oil revenues are expected to reach SR444.5 billion, representing 73 percent of the total revenue and it is 23 percent less than oil revenue during the previous fiscal year 1435/1436 (2014).
Non-oil revenue increased from SR126.8 billion in 2014 by SR36.7 billion to SR163.5 billion, an increase of 29 percent compared to 2014.
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