Saudi Arabia to boost 2023 spending, post narrow budget surplus

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Saudi Arabia announced plans to ramp up public spending next year, and said it still expects to post a budget surplus.

The Finance Ministry said in a preliminary budget statement on Friday that it expects a surplus of 9 billion riyals ($2.4 billion), or 0.2 percent of gross domestic product, smaller than an earlier estimate of 27 billion riyals. Spending is projected at 1.11 trillion riyals with revenue of 1.12 trillion riyals, the ministry said. The economy is forecast to grow 3.1 percent. The government maintained its prediction for a 90 billion-riyal fiscal surplus this year.

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Saudi Arabia is on track to balance the books a year ahead of schedule and wants to keep its budget in the black in the coming years after collecting a windfall from oil sales.

The world’s top oil exporter has emerged from the pandemic with a fast-improving balance sheet thanks to a rebound in crude. But now it has to balance the uncertainty in the oil market with the needs of an economy that still relies heavily on the flow of petrodollars into the government’s coffers.

In April, the International Monetary Fund raised its 2022 Saudi growth forecast by almost 3 percentage points, after Russia’s war on Ukraine drove oil prices higher. That was the biggest boost among major global economies. The fund projects growth next year at 3.6 percent.

Officials last year said the kingdom intends to decouple expenditure from crude market volatility, discontinuing a trend of raising spending when Brent prices are higher. Finance Minister Mohammed Al-Jadaan told Bloomberg earlier this year that the government will hold billions of dollars from its oil windfall in its current account and only decide how to distribute the money by the end of the year.

The kingdom needs oil prices at $69 per barrel to balance its books next year, according to the IMF, which is far below the median of estimates for international benchmark Brent crude in Bloomberg’s commodity forecasts survey.

A revenue crunch during the pandemic pushed the kingdom to triple value-added tax and trim public-sector pay, drawing complaints from citizens.

Brent crude prices have moderated since the beginning of the year, trading at around $88 a barrel on Friday, down from the year’s average of above $100 per barrel.

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