2004 Public Statement
 

12/08/2004
Budget 2005: Ministry of Finance report

Ministry of Finance Report on FY2004 outcome and FY2005 budget

 

The Ministry of Finance released on December 8, 2004, the following report on the highlights of the State Budget for the fiscal year 1425/1426 (FY2005), the outcome of the fiscal year 1424/25 (FY2004) and recent economic developments.

   

The State Budget for 1425/1426 (FY2005)

The State Budget for FY2005 continues the government’s focus on optimizing available resources, and gives priority to social infrastructure especially in education, health, social affairs, municipal services, water and sewage, and roads. Moreover, the budget puts special emphasis on capital expenditures that will create more job opportunities, enhance economic activities, and boost economic growth.

The main features of the 2005 budget

1. Total revenues are projected at SR280 billion [U.S. $74.77 billion].

2. Government expenditure is budgeted at SR280 billion [$74.77 billion].

3. The total cost of new projects amounts to SR75.5 billion [$20.20 billion].


Appropriations for FY2005

1. Education and manpower development:
Expenditure, SR70.1 billion [$18.72 billion] including technical and vocational training; new projects, SR14.65 billion [$3.91 billion].
New projects include 1,420 new schools in addition to 2,260 schools currently under construction, plus rehabilitation of 2,000 existing school buildings, 22 university colleges, and 4 university hospitals, and completion of the infrastructure of a number of universities. The technical and vocational training sector will have 10 new technical colleges, 32 vocational training centers, 19 other technical and training buildings, 5 new technical colleges and 11 vocational training centers.

2. Health and Social Affairs:
Expenditure, SR27.1 billion [$7.24 billion]; new projects, SR4.6 billion [$1.23 billion].
New projects include 420 primary care centers, 23 hospitals with a capacity of 3,150 beds, expansion and development of existing health facilities, and furnishing newly completed hospitals. There are also 62 hospitals currently under construction, providing 7,000 beds.

3. Municipal services:
Expenditure, SR10.65 billion [$2.84 billion]; new projects, SR7.20 billion [$1.92 billion].
New projects include street lighting as well as construction of urban roads, intersections, and bridges.

4. Transportation and telecommunications:
Expenditure, SR8.9 billion [$2.38 billion]; new projects, SR8.4 billion [$2.24 billion].
New projects include roads totaling 6,700 km in addition to 10,600 km of roads currently under construction, as well as ports, airports, and railroads, plus postal services, and the first phase of an expansion to King Abdulaziz Airport in Jeddah.

5. Water, Agriculture, and Infrastructure:
Expenditure, SR19.2 billion [$5.13 billion]; new projects, SR19.1 billion [$5.10 billion].
New projects include water, sewage, and desalination projects amounting to SR17.2 billion [$4.59 billion], as well as projects in the two industrial cities of Jubail and Yanbu, and agricultural projects, including flour mills.

6. Specialized Credit Development Institutions and Government Financing Programs
In addition to the increases in the capital of the Saudi Credit Bank and that of the Real Estate Development Fund to enable these two institutions to increase their lending programs, the other specialized development institutions will continue to provide credits to projects and services in the areas of industry, agriculture, and major infrastructure projects. These credits are projected to be over SR10 billion [$2.67 billion]; and the 2005 State Budget also includes appropriations for loans to private universities, colleges, and schools.


The Outcome for Fiscal Year 1424/1425 (FY2004)

The Ministry of Finance projects that revenues for FY2004 will reach SR393 billion [$104.94 billion], with expenditure amounting to SR295 billion [$78.77 billion], noting increases in certain emergency spending as well as settlement of payments to farmers. An amount of SR41 billion [$10.95 billion] will cover development projects (SR30 billion [$8.01 billion]) plus increased capital for the Saudi Credit Bank (by SR2 billion [$0.53 billion]) and for the Saudi Real Estate Development Fund (by SR9 billion [$2.40 billion]). The remaining revenues will be allocated to settle part of the public debt, which according to preliminary estimates will drop from its level of SR660 billion [$176.23 billion] at the beginning of FY2004 to around SR614 billion [$163.95 billion] at the end of FY2004.

Economic Developments in FY2004
1 - Gross Domestic Product
The Gross Domestic Product (GDP) is estimated to have grown in FY2004 by 16.9 percent in current prices (5.3 percent in constant prices), reaching SR931.8 billion [$248.82 billion]. One of the major factors contributing to this growth is the increase in both the price of oil and the quantity produced. As a result, the oil sector is expected to have grown in FY2004 by 28.2 percent in current prices. Private sector GDP is estimated to have grown by 6.7 percent in current prices (5.7 percent in constant prices); the non-oil industrial sector by 6.4 percent, the construction sector by 7.5 percent; the electricity, gas, and water sector by 4.5 percent; the transportation and communications sector by 7.8 percent; and the wholesale, retail, restaurant, and hotel sector by 4.9, all in constant prices.

2 - General Price Index
Inflation, as measured by the cost of living index, is estimated to have increased by 0.2 percent in FY2004, while the non-oil GDP deflator has shown a small increase of 1.0 percent.

3 - Balance of Payments
According to preliminary data from the Saudi Arabian Monetary Agency (SAMA), the current account is estimated to record a surplus in FY2004 amounting to SR193.2 billion [$51.59 billion] compared to SR105.2 billion [$28.09 billion] in FY2003. Non-oil exports are estimated to have grown by 23.8 percent in FY2004, totaling SR51 billion [$13.61 billion] and representing 11.3 percent of all exports.

4 - Money and Banking
The government’s fiscal, financial and monetary policies continue to be guided by the objective of maintaining stability in price level and exchange rate. The broad money supply during the first ten months of 2004 grew by 9.6 percent compared to 4.2 percent in the same period of the previous year. With regard to the banking sector, bank deposits recorded a growth of 10.1 percent during the first ten months of 2004, total bank claims on public and private sectors increased by 26.3 percent, and bank capital and reserves increased by 12.9 percent to reach SR53.1 billion [$14.18 billion].

5 - Other Developments
A number of factors and developments have enhanced the confidence of the private sector leading to its robust growth. These include:
(a) The implementation of the Capital Markets Law after the appointment of the Capital Market Authority in July 2004. Its first operation was approval for the offer of part of the shares of the new Itisalat Consortium Company for telecommunications; and to announce plans for the sale to the public, before the end of the year, of 70 percent of the shares of the National Company for Cooperative Insurance.
(b) The ‘A+’ for long-term local currency and ‘A’ for long-term foreign currency sovereign credit rating assigned to the Kingdom by Standard and Poor's for the second year running.
(c) The ‘A’ sovereign credit rating assigned to the Kingdom by Fitch Ratings in 2004.
(d) The continued increase in the stock market index during 2004, which by December was hovering around 8,000, compared to 4,400 at the beginning of the year.
(e) New fiscal, institutional, and structural reforms that were introduced in 2004 such as the new corporate tax law and the mining code, and by-laws for natural gas pricing, for loan guarantees of small and medium enterprises (SMEs), and for private sector participation in government electronic activities.
(f) Active participation of the private sector in government procurement with the total number of government contracts signed with the private sector in 2004 amounting to 2,850 contracts with a value of around SR38 billion [$10.15 billion].

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