ch a question seems to be repeated frequently at the end of every year. Some do not see a significant change in the figures on Saudi government spending while others attribute the rise in expenditure to the ongoing projects, the expanding economy, the increase in employment, the improvement of health care, the improvement of education, the increase of the roads and other indicators. Some would say that the rise in expenditure should directly reflect in terms of increase in salaries and direct lending from the state funds such as the real estate development fund.
I attempt to explain how the impact of the state budget affects the public life of the people in a simple manner so that the reader can absorb the subject of government spending and its direct and indirect impact on his life. Most government spending goes toward education and health, including the announcement of new projects at the two ministries. The reason for the focus is due to the fact that a direct investment in the education and health of the citizens would raise the standard of living.
For example, at the end of the 1980s and 1990s, there was no a significant expansion in education and health sectors because of the budget deficit resulting from the steep decline in oil prices in 1998 at less than $10 a barrel. At that time, the citizens found it difficult to get enrolled in universities and technical and professional institutes and the job seekers struggled to get jobs, sometimes it took more than two years for a graduate to find a job. In recent years and especially today, with increased spending on education and higher education, it is difficult to find high school graduates not being accepted at university and the chances to get a job for a serious job hunter is real.
This is because government expenditure became heavily geared toward infrastructure projects, transportation and ports. Also, the private sector was encouraged to invest in large industries such as iron, petrochemicals, refineries, financial companies and real estate development through a capital increase in the Industrial Development Fund, in addition to participating in the Public Investment Fund and the capital of those companies.
It aims primarily at increasing the employment of Saudis in the private sector for higher wages than the government does. In the area of housing, the government increased the capital of the Real Estate Development Fund and pumped SR 250 billion to provide 500,000 new houses. All these programs cannot be provided by the government if we do not enjoy high revenues from oil. Had the oil prices remained low in the past years, the government would have been unable to provide such programs and living standards would have become much more difficult than they are now.
It is true that there are difficulties and obstacles in the implementation, which in turn creates an impression of not understanding the facts surrounding government spending. It is true that government revenue might call into a huge reluctance to diversify the economy away from the effects of oil production and consumption. However, we should take advantage of these vast resources and the huge investments to serve the next generation. The existence of reserves that exceeds SR 2.2 trillion, the adoption of alternative energy projects in excess of the cost of SR 100 billion and the advanced transportation future investments, which might exceed SR 100 billion, also serve as investment for future generations. Therefore, government spending is not only for us, it is also for the coming generations.
To make the impact of such government expenditure more apparent and faster, I see that the government has to work to improve regulations and legislations in many sectors and has to urge employees to increase productivity as well as transparency and disclosure. The government should go ahead and improve the structure of the market for goods and services and encourage current employment programs to be better so that it does not affect the continued growth.
Briefly note that the government’s budget takes into account the overall picture of the obstacles facing the economy and the needs of society as a whole. The budget also focuses on an increase or reduction in spending that takes into account the capacity of the sectors to absorb those costs. Slow application and negative factors that occur during implementation thus affecting certain segments of society remain a possibility.
(Abdul-Wahab Abu Dahesh is a Saudi-based economic analyst, and can be found on Twitter: @AAbuDahesh. The article was first published in the Al-Eqtisadiah newspaper and translated by Arab News.) SHOW MORE
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