The Gulf’s largest economy has announced a more conservative spending plan in its 2020 budget, indicating that it will be careful with its purse strings amidst a challenging global economy and tumultuous oil prices.
Saudi Arabia said that it will spend up to $272 billion in 2020 while it aims to have revenues worth $222 billion. Health and education will continue to contribute about 35% of the budget, a statement from the Ministry of Finance said.
Careful spending comes amidst an expected budget deficit of $50 billion, nearly $15 billion more than last year. The Kingdom has posted a deficit since 2014 when the oil prices had first crashed from its peak.
"Budget 2020 comes in light of a global economic climate that prevails challenges, risks and protectionist policies, which requires flexibility in managing the public finances and enhancing the ability of the economy to address these challenges and risks,” Crown Prince Mohammed Bin Salman was quoted as saying in official news agency SPA.
“We aim, through this budget, to take advantage of what has been achieved from programs and build on it, so that the balance is continued between the pace of economic growth rates and the maintaining of sustainable financial stability that ensures support for this growth."
Saudi Arabia will also soon be listing its crown jewel - Aramco – a deal that could likely bring in the funds for it to diversify its investments. Last week, Aramco priced its initial public offering at $8.53 per share, raising $25.6 billion.
Despite some groundbreaking social reforms like allowing women to drive and lifting a ban on public entertainment, the world’s top oil exporter has been grappling with a slower growth rate as oil prices linger on the lower end despite production cuts. Once heavily reliant on oil prices for public spending, the Kingdom has been trying to diversify from its welfare-based economy as it looks to empower the private sector.