Saudi Arabia posts its largest budget deficit since 2018
Saudi Arabia has posted its biggest quarterly budget deficit since 2018 in a sign of the challenges faced by the Middle East’s largest economy in the wake of the Iran war.
The budget shortfall of 125.7 billion riyals ($33.5 billion) is more than double that for the same period last year.
Despite the kingdom attempting to rein in some of its spending on big-budget projects and splashier investments like LIV Golf, expenditure rose about 20% to $103 billion during the quarter.
While the conflict has caused disruption and damage to some infrastructure, Saudi Arabia has now diverted most of its oil exports to the Red Sea port of Yanbu and is benefiting from the higher oil price, meaning it could see improved revenues and a smaller shortfall for the second quarter if it maintains export levels, Bloomberg reports.
Saudi Arabia posts largest quarterly deficit since 2020
Saudi Arabia posted its largest quarterly budget deficit since 2020 as lower oil revenue and spending by the government on NEOM and some of Crown Prince Mohammed bin Salman’s other ambitious projects widened its fiscal gap.
Signs of the worsening deficit have been evident for months, with the slowing down of NEOM’s $500 billion desert city called The Line and the shelving of the $50 billion Mukaab centerpiece in Riyadh’s New Murabba district.
The fiscal pressure has coincided with a leadership shake-up, with veteran investment minister Khalid Al-Falih replaced by Fahad Al-Saif, a former Public Investment Fund executive.
According to a Finance Ministry report issued on Monday, the kingdom recorded a shortfall of about 31 billion riyals ($8.2 billion) in the fourth quarter, with total revenue slipping while expenditures remained elevated.
The budget report showed oil income from state giant Saudi Aramco fell about 12% year on year to roughly $45 billion.
The government says it retains room to borrow and manage debt levels because of its relatively low debt-to-GDP ratio and continued access to global debt markets.
