2005 Public Statement
 

12/13/2005
Budget 2006: Ministry of Finance Report
The Ministry of Finance released on December 12, 2005, the following report on the highlights of the State Budget for the fiscal year 1426/1427 (FY2006), the outcome of the fiscal year 1425/26 (FY2005) and recent economic developments.

The Outcome for Fiscal Year 1425/1426 (FY2005):
The Ministry of Finance projects that revenues for FY2005 will reach SR 555 billion [$147.98 billion], with expenditure amounting to SR 341 billion [$90.93 billion].  The remaining will be used towards settling part of the public debt, infrastructure projects, and development, as directed by royal decree. According to preliminary estimates, the public debt will drop to around SR 475 billion [$126.66 billion] (41% of GDP) at the end of fiscal year 1425/1426 (2005).


The State Budget for 1425/1426 (FY2006):

The State Budget for FY2006 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 2006 budget:
1. Total revenues are projected at SR 390 billion [$103.9 billion].
2. Government expenditure is budgeted at SR 335 billion [$89.33 billion]. 
3. The total cost of new projects amounts to SR 126 billion [$33.59 billion].

Appropriations for FY2006:
Appropriations for the main development and public service sectors for 1426/1427 [FY2006] are as follows:

1. Education and manpower development:
Expenditure, SR 87.3 billion [$23.3 billion], including technical and vocational training programs; new projects, SR 24.85 billion [$6.6 billion]. New projects include 2,673 new schools (in addition to 3,300 schools currently under construction); the renovation of 2,000 existing schools; With respect to higher education, the new budget includes three new universities in Jazan, Hail, and Al-Jouf, 85 university colleges, 3 university hospitals, completing infrastructure of some universities. In the technical and vocational
training sector, the new budget includes 3 new technical colleges, 15 vocational training centers, opening of 3 new technical colleges and 14 vocational training centers.

2. Health and Social Affairs:
Expenditure, SR 31 billion [$8.3 billion]. Total cost of new projects is estimated at SR 4.3 billion [$1.15 billion]. New projects include 440 primary care centers; 24 hospitals with a capacity of 3,800 beds; the expansion and development of existing health facilities; and furnishing newly completed hospitals. Meanwhile, there are 89 hospitals under construction that for an additional 10,650 beds.

3. Municipal Services:
Expenditure, SR 13.4 billion [$3.6 billion].
Total cost of new projects is estimated at SR 10 billion [$2.67 billion]

4. Transportation and Telecommunication:
Expenditure, SR 11.5 billion [$3.1 billion].
The total cost of new projects is estimated at SR 9.2 billion [$2.45 billion]. New projects include 5,700 km [3,541 miles] of roads (there are 12,000 km [7452] of roads currently under construction); as well as ports, airports, and railroad development and new postal services.

5. Water, Industry, Agriculture, Infrastructure and other Economic Sectors:
Expenditure, SR 22.5 billion [$5.9 billion].
New projects include water, sewage, and desalination projects amounting to SR 13 billion [$3.5 billion]. In addition, the budget includes projects in the two industrial cities of Jubail and Yanbu, agricultural projects, and flour mill projects.

6. Specialized Development Funds and Government Financing Programs:
The Saudi Credit Bank, the Real Estate Development Fund and the Saudi Industrial Development Fund will be funded so that they can increase their lending programs.
The development institutions listed above as well as the Public Investment Fund and Agricultural Bank will continue to provide credits to projects and services in
the areas of industry, agriculture, and major infrastructure projects. The aggregate amount of loans approved in year 2005 amounted to SR 22.5 billion [$5.99 billion]. The new budget includes appropriations for the special lending programs of private universities, colleges, and schools. In 2005, SR 300 million [$79.99 million] in loans were approved.


Economic Developments in FY2005:
1 - Gross Domestic Product
The Gross Domestic Product (GDP) is estimated to have grown in FY2005 by 22.7 percent in current prices (6.54 percent in constant prices), reaching SR 1, 152.6 billion [$307.33 billion]. Private sector GDP is estimated to have grown in FY2005 by 6.7 percent in current prices (5.7 percent in constant prices); the non-oil industrial sector by 8.4 percent, the construction sector by 6 percent; the electricity, gas, and water sector by 4.9 percent; the transportation and communications sector by 9.9 percent; and the wholesale, retail, restaurant, and hotel sector by 6.2 percent, all in constant prices.

2 - General Price Index
Inflation, as measured by the cost of living index, is estimated to have increased by 0.4 percent in FY2005, while the non-oil GDP deflator has shown a small increase of 1.14 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 FY2005 amounting to SR 460.3 billion [$122.74 billion] compared to SR 317.3 billion [$84.61 billion] in FY2004, an increase of 45.1 percent. Non-oil exports are estimated to have grown by 20.6 percent in FY2005, totaling SR 69 billion [$18.39 billion], representing 10.5 percent of all exports.   In addition, current account is projected to record a surplus of SR 326.5 billion [$87.06 billion] in FY2005 compared to SR 194.7 billion [$51.92 billion] in 2004, an increase of 67.7 percent.

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 2005 grew by 9.2 percent compared to 9.6 percent in the same period of the previous year. With regard to the banking sector, bank deposits recorded a growth of 9 percent during the first ten months of 2005, total bank claims on public and private sectors increased by 18.1 percent, and bank capital and reserves increased by 23.4 percent to reach SR 64.5 billion [$17.19 billion].

5- Other Developments
The government continues to pursue appropriate structural policies and initiatives with the aim of enhancing business environment. These include:
(a) The Capital Market Authority (CMA) continued to regulate and monitor the capital market with the objective of enhancing efficiency and transparency in securities transactions. In this regard, CMA issued the necessary bylaws required to implement the capital market law. In addition, CMA licensed seven consultancy and portfolio management companies.
(b) Accession of the Kingdom to the World Trade Organization (WTO).
(c) The signing of a “build, operate, own” (BOO) project with the private sector in Shuaiba to produce water and electricity, which is the first of four similar projects (the remaining are Shogaig, Jubail, and Ras Azour).
(d) The signing of North/South railroad advisory and supervisory contract services.
(e) The approval of new laws including the restructuring and reorganization of the courts system, the new labor law, electricity law, the formation of the competition protection council, human rights law, and the rules of real estate offering.
(f) Saudi Post and the Civil Aviation Commission have been restructured to operate on a commercial basis.
(g) Active participation of the private sector in the government procurement with the total number of government contracts signed with the private sector in 2005 amounted to 2,900 contracts with a value around SR 40 billion [$10.67 billion].

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