Saudi budget deficit halves after reforms, oil rebound

RIYADH: Saudi Arabia’s budget deficit halved in the first six months of this year, the finance ministry said on Sunday, following sweeping spending cuts and a stabilisation in oil prices.

The ultra-conservative kingdom has moved to diversify its traditionally oil-dependent economy following a sharp fall in crude prices.

The budget deficit dropped by 51 percent to 72 billion riyals ($19.2 billion, 16.2 billion euros) in the first half of 2017, the finance ministry announced.

“This result reflects an improvement in the management of public finances as a result of economic reform introduced through Vision 2030,” said Saad al-Shahrani, a high-ranking ministry official.

The Vision 2030 plan, announced by the kingdom last year, aims to develop Saudi Arabia’s industrial and investment base and boost small- and medium-sized businesses to create local jobs and reduce reliance on oil revenue.

It is the second budget report released by Riyadh since the authorities announced in May they would begin issuing the figures on a quarterly basis to boost transparency.

The kingdom has regularly posted budget deficits since 2014, following a slump in oil prices.

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Saudi Arabia, the world’s largest crude exporter, in December projected a budget deficit of $53 billion for this year.

Revenues for the first half of the fiscal year were up 29 percent to 308 billion riyals ($82.1 billion, 69.4 billion euros) from the same period last year. Spending in the first six months dropped 2.0 percent to 380.7 billion riyals.

As part of its reforms, Saudi Arabia is due to introduce value-added tax (VAT) in early 2018 along with the UAE and Qatar. Three other Gulf states — Bahrain, Kuwait and Oman — plan to follow at a later date.

Riyadh announced in June it had begun taxing foreigners working in the private sector as part of its fiscal reforms. The country is also preparing to sell just under five percent of energy giant Aramco next year.

Saudi Arabia raised $17.5 billion in its first international bond offering in October 2016.