Oil, tax increase, Saudi budget deficit narrows | Business and Economic News

According to data from the Saudi Ministry of Finance, the world’s largest crude oil exporter’s oil revenue in the second quarter of 2021 increased by 38% compared to the same period last year.

Driven by rising oil prices and a surge in taxes, Saudi Arabia’s budget deficit narrowed to 4.6 billion riyals ($1.2 billion) in the second quarter.

According to a statement from the Ministry of Finance, the world’s largest crude oil exporter’s oil revenues from April to June increased by 38% compared to the same period last year, while non-oil revenues tripled to 116 billion rials. .

This is mainly due to the increase in tax revenue after the government tripled the value-added tax to 15% in July last year-compared with the low base during the blockade last year. Expenditure is still restricted, about 253 billion riyals.

After last year’s crisis caused its budget deficit to soar to nearly 300 billion rials, rising oil prices are boosting Saudi Arabia’s public finances. The officials’ goal is to reduce this number to 141 billion riyals in 2021, and the goal is to have a deficit of about 5% of GDP. But so far, they will greatly exceed this target. While keeping expenditure below the target, the cumulative deficit in the first half of this year was only 12 billion riyals-capital expenditure in the first half of the year fell by 36% compared to the same period. . During last year.

“We expect the annual deficit to fall to 62 billion riyals,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital, adding that this gap will be “supported by oil revenues benefiting from market recovery.”

In the first six months of this year, the government borrowed far beyond its needs, raising nearly US$14 billion from local and international investors, exceeding the US$3.2 billion deficit. The Ministry of Finance said that the excess borrowings will be used to meet financing needs in the second half of the year.

Monica Malik, chief economist of Abu Dhabi Commercial Bank, said that the surge in non-oil revenue not only reflects higher taxes, but also reflects “the sharp recovery of non-oil economic activity, which has reached Up to the pre-pandemic level”.

Other data in the report include:

• After the government cancelled the “living expenses” allowance for workers on the grounds of financial constraints last year, the salary expenditure of government employees in the first half of the year fell by 1% compared with the same period last year.
• In the first half of the year, military spending fell by 2%, municipal service spending fell by 25%, and infrastructure and transportation spending fell by 19%
• As the government invests more in response to the pandemic, health and social development expenditures have increased by 20%