Source: Ministry of Finance, Budget Statement 2021

The Corona Virus outbreak, which started in 2019, resulted to economic distress and is suffered by the global economy. Due to the pandemic, the economic and financial stability of every country has been tested. Although vaccines have started to roll out this year, the time needed to recover from the crisis is still unpredictable, with other countries confronting the second wave and new variant of the virus, precautionary measures are still observed.

According to the Ministry of Finance (Mof), “the FY 2021 budget aims to provide assurance about the government’s ability to manage the crisis, gradually restore the pace of economic growth, strengthen the social benefits and subsidies schemes and continue to provide basic services.”

The Ministry also states that the budget for the year 2021 reflects KSA’s ability to adopt policies to balance growth, economic and financial sustainability.

The real GDP growth was estimated to decline by 3.7% (2020) due to the pandemic and its negative impact on oil demands and prices, which resulted to a fall in revenue of 770 Billion, Saudi Riyals, with SAR 196 B taxed and SAR 574 B non-taxed revenue. Although, oil is still the dominant source of revenue of the Kingdom, the government’s effort to diversify non-oil revenues are continues. With that in mind, the government has imposed 15% tax increased from 5% last year. 

The Ministry’s projection for the FY 2021 indicates an increase in real GDP growth rate of 3.2%, with the positive outlook that the economic activity will continue to recover this year. The revenues are forecasted to reach SAR 849 B, which is 10.3% higher than the last year’s estimated revenue (SAR 770 B). The government’s determination to implement various initiatives such as enhancing the role of private sectors, structural reforms to diversify the economy, domestics and foreign investments, mega projects, privatization and initiatives and programs to achieve the Vision 2030. With these initiatives, the government expected the revenues to rise. On the other note, the estimated expenditure in 2020 reached to SAR 1068 B, higher than the approved budget due to the expenditure on confronting the pandemic. However, the MoF forecasted that the government’s expenditure will decline by 7.3% or SAR 990 B. Also, the budget deficit to decline to SAR 141 B (4.9% of GDP) in 2021 compared to last year’s deficit of SAR 298 B.

Expenditures by Sector:

The MoF states that “the kingdom seeks to direct spending towards promising sectors that provide job opportunities to Saudi youth and expand the opportunity for the private sector to invest in infrastructure projects that improve the level of basic services.”

The sectors that receive the largest budget expenditure for 2021 (SAR 990 B) are the Education Sector (19%), Health and Social Development Sector (18%), Military Sector (18%) and the General Items (15%), which includes the government contribution to pension funds and social insurance, debt service, contributions to international organizations, and other contingency provisions