Facing the dual threat of the COVID-19 pandemic’s economic effects and state of the oil market, Saudi Arabia has announced spending plans for 2021 that include expenditure cuts and careful fiscal planning yet are in other respects expansionary and optimistic. The plan prioritizes pandemic-related aid, encourages private sector investment in capital projects, and enacts careful fiscal measures to decrease the debt to Gross Domestic Product (GDP) ratio while pursuing a balanced budget.
Total spending in 2021 is projected to shrink 7.3 percent from last year to $264 billion (SR990 billion), with expected revenue rising 10.3 percent to $226.4 billion (SR849 billion) and the budget deficit shrinking to $37.6 billion (SR141 billion). This projected deficit will be 4.9 percent of GDP in 2021 compared to 2020’s deficit of nearly $80 billion (SR298 billion), or 12 percent of GDP. Additional estimates by the Ministry of Finance project that the debt to GDP ratio will fall to .4 percent of GDP by 2023, as spending is cut each year with the goal of balancing the budget after this time. The budget also plans for a 26 percent reduction of capital expenditures from $36.53 billion (SR137 billion) in 2020 to $26.93 billion (SR101 billion) in 2021. This significant drawdown was made possible by heavy infrastructure investments in previous years, leaving room for the private sector to step in. Looking forward, the Saudi government has established strong fiscal buffers allowing it to withstand global shocks (such as the pandemic) and hold its debt ceiling well below 50 percent of GDP.
The events of 2020 delayed many of this year’s Vision Realization Program initiatives, but the government still intends to deliver on its Vision 2030 promises with Public Investment Fund (PIF) support for increased private sector involvement; to this end, the PIF has already committed $80 billion (SR300 billion) to domestic spending in 2021 and 2022. As stated by Finance Minister H.E. Mohammed Al-Jadaan, the spending plan allows enough financing for pandemic-related aid while enabling the government to “stimulate the economy and support growth and diversification” through private sector involvement. H.R.H. Crown Prince Mohammed bin Salman declared that Vision 2030, and the Kingdom’s overall economy, had withstood the “stress test” of the pandemic, while The Custodian of the Two Holy Mosques H.M. King Salman concluded that the Saudi budget prioritizes the health of its citizens and the recovery of its economy.