1998 News Story

Budget statement from Ministry of Finance
The Ministry of Finance and National Economy is pleased to highlight recent economic developments and the main features of the state budget for the fiscal year 1419/1420 H (1999).
SUMMARY FOR FY 1418/1419 H (1998)

The following budgetary outcomes were achieved during 1998:


SR 143 billion

(U.S. $ 38.1 billion)


SR 189 billion

(U.S. $ 50.4 billion)


SR 46 billion

(U.S. $ 12.3 billion)

SUMMARY OF BUDGET FOR FY 1419/1420 (1999)

Projected Revenues:

SR 121 billion

(U.S. $ 32.3 billion)

Budgeted Expenditures:

SR 165 billion

(U.S. $ 44.0 billion)

Projected Deficit:

SR 44 billion

(U.S. $ 11.7 billion)


In 1998 the financial crisis which started in Southeast Asian countries adversely affected the growth of the world economy, international trade, and prices of primary commodities, including oil. These economic developments led to a contraction in the oil sector in 1998, estimated at 34.8 percent in current prices.

The private sector's contribution to the Gross Domestic Product (GDP), however, is estimated to have grown in 1998 by 2.12 percent in current prices, with its share in the overall GDP increasing to 40.1 percent compared to 34.3 percent in 1997. Non-oil industry and construction sectors are estimated to have grown by 5.5 percent and 1.9 percent in current prices respectively. The utilities sector (electricity, gas, and water) is estimated to have grown by 3.45 percent. All of this indicates that the private sector is continuing to expand, that its efficiency is increasing, and that it is depending less on government spending. These achievements will be reinforced by ongoing efforts in privatization and improvement of investment regulations and procedures.

The GDP is estimated to have grown in 1998 by 1.6 percent in constant prices, although it fell by 10.8 percent in current prices as a result of the sharp decline in the oil sector and in spite of positive growth in the non-oil GDP.

Inflation, as measured by the cost of living index, is estimated to have declined by 0.2 percent in 1998, while the non-oil GDP deflator shows a small increase of 0.02 percent, which reflects continued price stability.

The sharp drop in oil prices during 1998 led to a decrease in the value of oil and petrochemical exports; this was reflected in a decline in the surplus of the balance of trade, which amounted to SR 44.2 billion (U.S. $ 11.79 billion) in 1998. The current account is estimated to have recorded a deficit of SR 49 billion (U.S. $ 13.07 billion) in 1998, mostly financed through capital movements of the oil sector and the private sector, including the banking sector.

However, government policies to rationalize spending, promote saudization and encourage national tourism, have minimized the effect of the decline in oil prices on the balance of payments.

The government's fiscal and monetary policies continue to be governed by the objective of maintaining stability in prices and a stable exchange rate. The broad money supply during the first eleven months of 1998 grew by 0.6 percent, reaching SR 273.6 billion (U.S. $ 72.96 billion) compared to a growth of 3.9 percent for the same period of the previous year. This modest growth of money supply was reflected in the small decrease in the consumer price index.

During the first 11 months of fiscal year 1998, the performance of the commercial banks continued to improve. The total amount of bank claims on public and private sectors increased by 14 percent, reaching SR 268 billion (U.S. $ 71.47 billion). This increase reflects the important role of the commercial banks in satisfying the financing needs of both sectors. Due to the increase of economic activity and the availability of domestic investment opportunities, banking capital and reserves increased by 5.2 percent in the first 11 months of fiscal year 1998 reaching SR 40.4 billion (U.S. $ 10.77 billion) by the end of November 1998. The average risk-weighted capital to assets ratio is 21 percent, which is about three times the international standard. Profits in the commercial banks rose by 16.2 percent to SR 6.8 billion (U.S. $ 1.81 billion) at the end of November 1998, indicating the strong and solid position of the Saudi banking system.

Despite the fact that most joint-stock companies listed in the system realized healthy profits, the Kingdom's stock market was affected by the turbulence in international financial markets. However, this impact was limited. The share index stood at 144.33 as of December 26, 1998 compared to 195.78 at the end of the previous year (1997). This represents a decrease of 26.28 percent. The value of traded shares during the period dropped by 18 percent to SR 51 billion (U.S. $ 13.6 billion).

Consistent with the government's announced policy, the Telecommunications Sector has been privatized and a joint stock company established; its shares will be publicly offered in the near future. The Ministerial Committee for Privatization is reviewing proposals to privatize other sectors. In addition, the Council of Ministers recently approved the restructuring of the Electricity Sector to enable the private sector to invest in it.


BUDGET FOR FY 1419/1420 (1999)

The government of the Custodian of the Two Holy Mosques will continue efforts to reduce government spending and increase revenues to offset the sharp decline in oil revenues.


SR 42.9 billion (U.S. $ 11.44 billion) for education including vocational training;

SR 18.7 billion (U.S. $ 4.99 billion) for health services and social development;

SR 6.6 billion (U.S. $ 1.76 billion) for municipality services and water authorities;

SR 5.2 billion (U.S. $ 1.39 billion) for transportation and communication;

SR 4.8 billion (U.S. $ 1.28 billion) for subsidies and social programs;

SR 8.5 billion (U.S. $ 2.27 billion) for infrastructure, industry and electricity, including power projects financed from the Electricity Fund (*).

(*) Note: at the end of FY 1418/19 H (1998), the value of projects financed through the fund was SR 16.9 billion (U.S. $ 4.51 billion): expenditures on these projects are estimated at SR 2.2 billion (U.S. $ 0.59 billion) in 1419/20 H (1999).


In addition to the government expenditures outlined above, the specialized development institutions, namely the Industrial Development Fund, the Agricultural Bank, the Real Estate Development Fund, the Credit Bank, and the Public Investment Fund will continue providing loans for development projects in the areas of industry, agriculture and real estate. The loans to be provided by these institutions in 1999 are projected at SR 6.4 billion (U.S. $ 1.71 billion), the same amount as in 1998.



SPA December 29, 1998

Three royal decrees were issued today promulgating the state budget for the fiscal year 1419/1420 (1999).

Royal Decree no 1 includes the following:

The budget revenues for the fiscal year 1419/20 are projected at SR 121 billion, while the expenditures are estimated at SR 165 billion. Revenues are to be allocated in accordance with the financial rules and to be paid to the Saudi Arabian Monetary Agency (SAMA) and its branches.

The Ministry of Finance and National Economy is delegated to borrow to bridge the gap between expenditures and revenues of FY 1419/20. Expenditures shall be in accordance with the approved budget and the related instructions. The shifting of any allocations from one section or sub-section to another can only be done with the approval of the Prime Minister upon the recommendation of the Minister of Finance and National Economy. Allocations should not be used for any purpose other than the one they were designed for.

No contracts which might lead to financial commitments for the coming year shall be signed or concluded with the exception of already approved contracts.

It is prohibited to appoint or promote employees to any jobs other than those approved in the budget and in accordance with set conditions. Other than the appointment of ministers no new job shall be created other than those in the budget.

It is not allowed to change the administrative structures shown in the budget without approval from the Higher Administrative Reform Committee.

The Minister of Finance and National Economy shall issue the necessary guidelines to implement this budget.

Royal Decree no 2 details revenues/expenditures of municipalities and water departments.

The expenditures of the municipalities and water departments for the fiscal year 1419/20 are projected at SR 6,241,491,000, while the revenues are estimated at SR 1,234,840,000.

The budget deficit is estimated at SR 5,006,651,000.

Municipalities and water departments shall collect their revenues in accordance with the related financial rules.

Expenditures are to be spent in accordance with the related financial rules. Shifting of allocations can be made only with the approval of the Prime Minister in accordance with a recommendation from the Minister of Municipal and Rural Affairs and the Minister of Economy and Finance.

Royal Decree no 3 highlights the revenues and expenditures of public corporations whose budgets are annexed to the public budget.

Revenues and expenditures of:

The Ports Authority: SR 535,588,000

Saudi Arabian Airlines: SR 9,538,000,000

Public Electricity Corporation: SR 512,178,000

General Organization for Grain Silos and Flour Mills: SR 995,000,000; (expenditures: SR 384,865,000)

Saline Water Conversion Corporation: SR 2,430,884,000

Saudi Railways Organization: SR 188,376,000

PETROMIN: SR 37,105,000

Royal Commission for Jubail and Yanbu: SR 1,267,141,000

Saudi Arabian Standards Organization: SR 59,386,000

King Saud University: SR 1,765,864,000

King Abdulaziz Univeristy; SR 1,134,426,000

King Fahd University of Petroleum and Minerals: SR 404,172,000

Imam Mohammed Ibn Saud Islamic University: SR 857,942,000

Islamic University in Madinah: SR 211,017,000

King Faisal University: SR 513,131,000

Umm al Qura University: SR 551,897,000

King Khalid University: SR 300,738

General Organization for Technical Education and Vocational Training: SR1,171,314,000

King Abdulaziz City for Science and Technology: SR 236,487,000

Public Administration Institute: SR 184,671,000

Saudi Red Crescent Society: SR 206,840,000

General Organization for Military Industries: SR 511,883,000

Pensions Fund: SR 23,420,000,000 (expenditures: SR 11,292,040,000)