Saudi Arabia saw an 11 percent boost in non-oil revenues, reaching SR457.73 billion ($122.06 billion) in 2023 compared to 2022, primarily driven by increased taxes on income, profits, and capital gains.
According to the fiscal year 2023 budget performance report released by the Ministry of Finance, these taxes surged by 58 percent, totaling SR38.64 billion.
This aligns with Saudi Arabia’s efforts to position itself as a global investment destination and business center, aspiring to join the ranks of the world’s leading economies.
The surge in foreign direct investment into Saudi Arabia may have contributed to an uptick in tax revenues as more international businesses establish operations in the country.
The government’s initiatives to enhance FDI inflows, including offering zero income tax for companies relocating their regional headquarters to Saudi Arabia, are also poised to yield long-term benefits.
These measures are expected to spur economic growth, foster expansion, and generate employment opportunities.
Talking to Arab News, Talat Zaki Hafez, an economic columnist and banking expert, laid emphasis on the significant impact of these government incentives, as they are expected to stimulate business activities in the Kingdom.
Furthermore, other revenues, including those from various government units and administrative fees, rose by 15 percent to SR101.1 billion, constituting 22 percent of the total state revenues.
Despite taxes on goods and services contributing the highest share at 57 percent, they experienced a more modest 4 percent increase.
Conversely, oil revenues underwent a 12 percent decrease to SR754.56 billion, constituting 62 percent of the budget’s revenues. This decline, attributed to voluntary oil output cuts, underscores Saudi Arabia’s commitment to Vision 2030 reforms aimed at strengthening the non-oil economy’s role in national development.
Total revenues amounted to SR1.21 trillion, marking a 4 percent decline from the previous year, yet surpassing the ministry’s December 2023 estimates by 2 percent.
Government expenditure
Based on data from the ministry, total expenditure increased by 11 percent to SR1.29 trillion, predominantly driven by an 18 percent increase in expenses for goods and services, reaching SR303.4 billion. The substantial share of this category at 23 percent played a significant role in propelling the overall increase.
The surge in government expenditure can be attributed to the introduction of a wide range of infrastructure projects in Saudi Arabia, aimed at diversifying the economy away from oil and aligning with Vision 2030.
These initiatives aim to position the Kingdom as a global investment and logistics hub, promoting investments in sectors such as smart cities, tourism, and renewable energy.
Riyadh’s securing of the hosting rights for the 2030 World Expo underscores the government’s commitment to fostering economic growth and sustainability through strategic infrastructure development.
Additionally, non-financial assets capital expenditure, representing investments in tangible assets for production purposes, increased by 30 percent to SR186.5 billion.
The fourth quarter of 2023 witnessed the sharpest rise in CAPEX, increasing by 84 percent to SR75.84 billion from SR41.2 billion in the third quarter of the same year.
According to Hafez, the Saudi government’s use of the cash-basis accounting method for its budget figures, rather than the accrual basis, may result in certain expenditures being recorded in different quarters of the year.
He also highlighted that the SR81 billion budget deficit could be mainly attributed to increased capital expenditure on the Kingdom’s development projects.
Despite compensation to employees accounting for the largest share at 42 percent, it saw the third-largest impact, growing by 5 percent to SR537.32 billion. These benefits provided to employees in exchange for their work include social security contributions paid by the government unit on behalf of its employees.
Sectors that were revealed to have received the highest allocation in government expenditure were health and social development, military, and education.
The US International Trade Administration reported that Saudi Arabia constitutes 60 percent of the Gulf Cooperation Council countries’ healthcare spending, with the sector being a top priority for the Saudi government.
As part of Vision 2030, the government plans to invest over $65 billion to enhance the nation’s healthcare infrastructure, privatize health services and insurance, establish 21 health clusters nationwide, and expand e-health services.
Additionally, the government aims to increase the private sector’s contribution from 40 percent to 65 percent by 2030, intending to privatize 290 hospitals and 2,300 primary health centers.
At the conclusion of 2023, government reserves amounted to SR390 billion, accompanied by a current account balance of SR46.3 billion. Additionally, public debt reached SR1.05 trillion, with domestic debt accounting for 61 percent of the total.
Budget 2024
In December 2023, Saudi Arabia approved the state budget for 2024, projecting revenues of SR1.17 trillion and expenditures of SR1.25 trillion.
The Kingdom plans to increase spending to accelerate the implementation of key programs aligned with Saudi Vision 2030 objectives. Finance Minister Mohammed Al-Jaadan noted that the annual budget was based on conservative estimates of oil revenue, indicating that deficits result from intentional spending increases rather than fluctuations in oil prices.
According to the ministry’s budget 2024 report, the government plans to continue domestic and external borrowing activities to address its financing requirements and manage expected budget deficits.
It aims to capitalize on market conditions to secure additional funding and repay debt while financing strategic projects.
The projected total debt is expected to increase to around SR1.10 billion in fiscal year 2024, representing 25.9 percent of gross domestic product, with sustainable growth anticipated over the medium term to meet financing requirements.
In February 2024, Fitch affirmed Saudi Arabia’s A+ credit rating with a stable outlook, citing strong fiscal and external balance sheets. The agency highlighted that government debt to GDP and sovereign net foreign assets surpass median levels for similar ratings.
According to Fitch, the Kingdom boasts one of the highest reserve coverage ratios among Fitch-rated sovereigns, equivalent to 16.5 months of current external payments.