King Salman announced Monday expenditures will reach $272 billion next year, a nearly 8% decrease from last year’s record-high spending estimate of $295 billion. Saudi Arabia anticipates $222 billion in revenue next year, down 14.6% from the $260 billion estimated for 2019.
The kingdom has been grappling with a deficit since oil prices first plunged in 2014. It has increased spending during that time, though, by drawing from its robust fiscal reserves to cushion the impact of austerity measures like new taxes and subsidy cuts, and to expand citizen welfare programs and monthly allowances for civil servants, students and soldiers.
This year's curb on expenditures marks a departure from the march toward greater spending, but the government says its cash assistance program, started last year for lower-income Saudi families, will continue.
For years, one of the largest expenditures has been on public sector wages. The government is looking to the private sector, however, to create the needed new jobs for Saudis. Analysts say Saudi Arabia needs oil prices at least above $70 a barrel to balance its budget. Brent crude traded at $64 on Monday.
To diversify away from its reliance on oil revenue, the government aims to generate billions of dollars from the partial sale this week of state oil company, Aramco. The IPO is also seen as means to attract foreign investment.
The sale is expected to break the record for the biggest flotation ever when trading commences on the Saudi stock exchange Wednesday. A lead bank advising Aramco on the IPO said Monday the company is selling a 1.7% stake for $29.4 billion following strong interest by local Saudi funds.
“God willing, we will continue to grow our economy and to diversify our income, like for example through investments such as putting Saudi Aramco on the stock market," the king said while announcing the budget.
The annual Saudi budget is watched closely because it offers one of the clearest indicators of whether the kingdom is on track with its Vision 2030 plans, the blueprint put forth by Crown Prince Mohammed bin Salman to overhaul the economy, particularly as sustainable sources of energy become cheaper and more popular.
Fay Abuelgasim contributed from Dubai, United Arab Emirates.