2007 News Story
 

12/11/2007
Ministry of Finance issues statement on FY 2008 budget

The Ministry of Finance issued a statement yesterday highlighting economic developments in 2007 and outlining the state budget for FY 2008 (1428/1429 H). 


Regarding the state budget for FY 2008, the Ministry said that the budget would continue to focus on health and social development, including education, health care, social affairs, municipal services, water and sewage, and roads.

The FY 2008 budget projects total revenues of SR 450 billion [$120 billion], expenditures of SR 410 billion [$109.33 billion], and total allocations for new and existing projects of SR 165 billion [$44.2 billion].

For 2007, the Ministry projects revenues of SR 621.5 billion [$166 billion] and expenditures of SR 443 billion [$118.6 billion]. The GDP for 2007 is expected to reach SR 1.414 trillion [$378 billion] at current prices, growing 7.1 percent at current prices (3.5 percent at constant prices). The oil sector is expected to grow by 8 percent, the private sector by 7.6 percent, and government sector by 3.4 percent at current prices.

Of the budget surplus for 2007, SR 25 billion [$6.7 billion] will be allocated to the Real Estate Development Fund, SR 100 billion [$26.7 billion] to the nation’s reserves, and the remainder to pay down the national debt. Preliminary estimates indicate that the national debt is expected to be reduced by SR 267 billion [$71.5 billion] by the end of 2007, approximately 19 percent of the GDP compared with 28 percent of the GDP in 2006.

The Saudi government also signed 3,200 contracts worth SR 83 billion [$22.2 billion] with the private sector in 2007.


Appropriations for 2008 the major sectors are as follows:

Education and workforce development:
a. Total expenditures amount to SR 105 billion [$28.1 billion] including technical and vocational training.
b. New capital budget total SR 39 billion [$10.4 billion]. These include the King Abdullah Project for Education Development amounting to SR 9 billion [$2.4 billion]. In addition, new projects include 2,074 new schools (as well as 4,352 schools currently under construction), and the renovation of 2,000 existing school buildings. With respect to higher education, the new budget includes appropriations for the University of Northern Border Region, the infrastructure of the new girls’ university campus in Riyadh, and opening of 41 new colleges. In addition, the scholarship program in medicine, engineering, computer science, law, and accounting will continue next year. In the technical and vocational training sector, the new budget includes opening 7 new technical institutes for girls and 16 vocational training centers. In addition, the implementation of the National Plan for Science and Technology amounting to SR 8 billion [$2.1 billion] is underway.

Health and Social Affairs:
a. Total expenditures amount to SR 44.4 billion [$11.9 billion].
b. New capital budget total SR 6.3 billion [$1.7 billion]. New projects include over 250 primary care centers, 8 hospitals with a capacity of 1,900 beds, expansion and development of existing health facilities, and furnishing newly completed hospitals. Meanwhile, there are 79 hospitals under construction which will add 9,850 beds.
c. With respect to social services, the new budget includes appropriation to build sport clubs, social centers, social welfare and labor offices. In addition, it includes funds for housing, support of poverty reduction programs, and increase in disabled allocations.

Municipality Services:
a. Total expenditures amount to SR 17 billion [$4.5 billion].
b. New capital budget totals SR 14 billion [$3.7 billion]. New projects include intercity roads, intersection and bridges, traffic lights, and cleaning-related projects.

Transportation and Telecommunications:
a. Total expenditures amount to SR 16.4 billion [$4.4 billion].
b. New capital budget totals SR 14.6 billion [$3.9 billion]. New projects include roads totaling 7,300 km to be added to 24,000 km of roads currently under construction, the development of ports, airports, and railroads, and new postal services. In this respect, the existing paved road network stands now at 54,000 km.

Water, Agriculture, and Infrastructure Sector:
a. Total expenditures amount to SR 28.5 billion [$3.6 billion].
b. New capital budget totals SR 20.9 billion [$5.6 billion]. They include projects for water, sewage, and desalination projects amounting to SR 13.3 billion [$3.6 billion]. In addition, the budget includes appropriation for the two industrial cities of Jubail and Yanbu and other industrial and agricultural projects amounting to SR 7.6 billion [$2 billion].

Specialized Credit Development Institutions and Government Financing Programs:
a. SR 25 billion [$6.7 billion] to be allocated to the Real Estate Development Fund over five years.
b. Loans disbursed by Real Estate Development Fund, Saudi Industrial Development Fund, Saudi Credit and Saving Bank, and Agricultural Bank since their inception amounted to SR 224.7 billion [$60.2 billion]. SR 16.2 billion [$4.3 billion] is expected to be disbursed in 2008 including credits to build hotels, schools, universities, and hospitals.
c. Private higher education scholarship program will continue in 2008.
d. Saudi Export Program managed by the Saudi Fund for Development financed SR 6.9 billion [$1.8 billion].

Economic Developments in 2007:

Gross Domestic Product
According to Central Department of Statistics and information, GDP is estimated to grow in 2007 by 7.1 percent at current prices 3.5 percent at constant prices, reaching SR 1.414 trillion [$378 billion]. The oil sector is expected to grow by 8 percent, private sector by 7.6 percent, and government sector by 3.4 percent in current prices.

Private sector GDP is estimated to grow by 5.9 percent at constant prices. In particular, the non-oil industrial sector is estimated to grow by 8.6 percent; construction sector by 6.9 percent; electricity, gas, and water sector by 4.4 percent; transport and communication sector by 10.6 percent; wholesale, retail, restaurants, and hotels by 6 percent; and finance, insurance and real estate by 4 percent in constant prices. In addition, private sector contribution to GDP is expected to be 46.1 percent in constant prices.

General Price Level
Inflation, as measured by the cost of living index, is estimated to have increased by 3.1 percent in 2007, while the non-oil GDP deflator has shown an increase of 1.6 percent.

Foreign Trade and Balance of Payment
According to the Central Department of Statistics and information, total exports of goods and services are expected to grow by 6.7 percent reaching SR 900.8 billion [$241.2 billion] in 2007. Non-oil exports of goods are expected to grow by 24.9 percent amounting to SR 106.8 billion [$28.6 billion], representing 12.4 percent of total goods exported.

Total imports of goods and services are expected to grow by 20.5 percent in 2007 amounting to SR 512.1 billion [$137 billion]. According to SAMA’s preliminary data, trade balance is estimated to record a surplus of SR 555.6 billion [$148.8 billion] in 2007, an increase of 1.1 percent. Current account is estimated to record a surplus amounting to SR 344.4 billion [$92.2 billion] in 2007 compared to SR 371 billion [$99.3 billion] in 2006.

Money and Banking
The broad money supply during the first ten months of fiscal year 2007 grew by 13.5 percent compared to 11.8 percent for the same period of pervious year. With regard to banking sector, bank deposits recorded a growth rate of 15 percent during the first ten months of 2007, total bank claims on public and private sectors increased by 12.7 percent; also, their capital and reserves increased by 30.9 percent reaching SR 104.7 billion [$28 billion]. In addition, the number of licensed insurance companies has increased to 21.

Capital Market
The National Share Index increased in 2007 over last year reaching 9,892 as of December 5, 2007, compared to 7,933 at the beginning of the year.
The Council of Ministers appointed the board of Tadawul Company. In addition, the Capital Market Authority (CMA) continued to develop the necessary bylaws of the capital market law, namely the bylaws of mutual funds and mergers and acquisitions. Also, 24 IPOs were completed increasing the number of companies listed in the stock market to 108. CMA licensed 37 companies and offices to perform consultancy and portfolio management.

Other Developments:
A number of initiatives and government actions that should enhance the confidence of the private sector leading to its robust growth have taken place during this fiscal year. They include:
a. Standard & Poor’s upgrade of Saudi Arabia’s sovereign rating to AA-.
b. New fiscal, institutional, and structural reforms have been introduced in 2007 such as the law of the judiciary and the grievances law.
c. The establishment of the National Commission for Integrity and Anticorruption, Saudi Export Development Commission, and the General Housing Authority.
d. The approval of the National Plan of Telecommunications and Information Technology.

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