The Kingdom of Saudi Arabia has announced its biggest ever budget despite a second year of falling crude-oil prices which have impacted the country’s coffers.
The budget aims to boost the economy by increasing state spending by more than 7 percent next year to 1.106 trillion riyals (US $295 billion).
The budget was announced by King Salman who said, "We are determined to go ahead with economic reform, achieving fiscal discipline, improving transparency and empowering the private sector," he said.
The Saudi government aims to boost the economy as it faces record-high unemployment rates at over 12%.
The King also announced that the government of Saudi Arabia will continue paying its citizens cost-of-living allowances despite its growing deficit. The International Monetary Fund had forecast that Saudi Arabia's budget deficit would shrink to less than 2 percent of gross domestic product in the event that the allowances paid to its citizens were scrapped. King Salman announced that allowances of 1,000 riyals a month (approximately US $266) that are paid to civil servants and military personnel, and other allowances will continue for pensioners and those living on social security.
The budget deficit for 2019 will now be 4.2 percent of GDP, according to the government's statement Tuesday.
The Kingdom's Crown Prince Mohammed bin Salman has envisioned a plan 'Vision 2030' that aims to revitalize the economy by bringing in investment from abroad and instituting sweeping changes. That too is weighing on the economy.
Businesses in Saudi Arabia have struggled as they have had to deal with higher electricity and fuel prices and a five percent value-added tax (VAT) introduced at the start of this year. The Saudi finance ministry said it has collected US $12 billion from VAT so far.
Finance Minister Mohammed al-Jadaan told a news conference public debt was projected to rise to 21.7 percent of gross domestic product from its current level of 19.5 percent.
Taking these headwinds into consideration, “Saudi Arabia’s real gross domestic product is expected to expand 2.3 per cent in 2018, after shrinking 0.7 per cent in 2017. It is expected to grow 2.6 per cent in 2019,” said the minister.