Saudi Arabia released a more tightfisted budget for 2016, reflecting scaled-back revenue expectations and lower spending on subsidies because of sinking oil prices and its involvement in the war in neighboring Yemen. Here are some key points in the first spending plan under King Salman, released on Monday by the Ministry of Finance:
The government forecasts the deficit will narrow to 326.2 billion riyals ($87 billion) in 2016, from 367 billion riyals this year.
The 2015 deficit is about 16 percent of gross domestic product, according to Alp Eke, senior economist at National Bank of Abu Dhabi. The median estimate of 10 economists forecast a shortfall of 20 percent of GDP this year, according to data compiled by Bloomberg.
Seventy-three percent of this year’s 608 billion riyals in revenue came from oil, down 23 percent from 2014 and below the 715 billion riyal target. The government says it may resort to local and foreign borrowing to bridge the budget deficit.
For 2016, the government estimates revenue of 513.8 billion riyals. It allocated 183 billion riyals in provisions for low oil prices in 2016.
The government plans to spend 840 billion riyals in 2016 compared with 975 billion riyals this year. The biggest ticket in the budget was 213 billion riyals allocated for military and security services.
Economy Minister Adel Fakeih said Monday that 20 billion riyals of this year’s spending overshoot was due to increased military and security spending related to the military operation against Shiite Houthi rebels in Yemen.
SHORING UP FINANCES
The government, headed by King Salman bin Abdulaziz Al Saud, pledged to take action to shore up public finances, including the possible sale of government entities and the revision of fuel, water and power subsidies over the next five years.
It immediately rolled out the first batch of revisions after the budget announcement, raising the prices of water and electricity supplied to households and the cost of gasoline, ethane and gas. The revisions focused on “directing subsidies to those who really deserve it,” Fakeih said.-Bloomberg