Ministry of Finance Report on FY2009 outcome and FY2010 budget

December 21, 2009

Outcome of Fiscal Year 1430/1431 (2009) 

The Ministry of Finance projects actual revenue to be SR 505 ($134.67) billion in 2009 and actual expenditure to be SR 550 ($146.67) billion, resulting in an actual deficit of SR 45 ($12) billion.  Increases in actual over budgeted expenditures in 2009 reflect increases in expenditures on projects in the Two Holy Mosques and other Mashair, food and welfare subsidies, transfer of temporary to permanent employment, and increases in student enrollments in universities as well as scholarships abroad program.

Public debt is estimated to decline from SR 237.0 ($63.2) billion at the end of 2008 to SR 225 billion ($60 billion) at the end of 2009, although as a percentage of GDP, it will increase from 13.3 percent at the end of 2008 to 16 percent at the end of 2009 because of the decline in nominal GDP in 2009.  The public debt is totally domestic. 

The National Budget for 1431/1432 (2010) 

The 2010 national budget will continue to focus on enhancing economic development and improving investment environment that supports strong and balanced economic growth.  This year’s budget includes SR 260 billion ($69.33 billion) for investment projects, a 16 percent increase over 2009 budget, an increase of about 16 percent over the last year’s budget, which was the largest historically, and about three times the level in 2005, the first year in the current 8th Development Plan.  The budget gives high emphasis to projects that ensure sustainable and balanced development as well as job creation.  Specifically, the focus continues to be on education, health, social and security services, municipal services, water and sewage services, and roads and highways. Moreover, the budget attaches a particular importance to projects related to research and development (R&D) as well as science and technology projects and the e-government.  

The main highlights of the 2010 budget are:  

1.      Total revenues for fiscal year 2010 are projected at SR 470 billion ($125.3 billion).

2.      Government expenditures for fiscal year 2010 are budgeted at SR 540 billion ($144 billion).

3.      Fiscal deficit for 2010 is projected at SR 70 billion ($18.7 billion). 

Appropriations 

Appropriations for the main development and public service sectors for 1431/1432 (2010) are as follows: 

1.      Education and Training:

a.      Total expenditure amounts to SR 137.6 billion ($36.7 billion), representing more than 25 percent of FY 2010 appropriations and an increase of 13 percent over FY 2009 appropriation.

b.      Continued implementation of King Abdullah Initiative for Education Development amounting to SR 9.0 billion ($2.4 billion) through the Education Development Holding Company owned by the Public Investment Fund (PIF)

      New projects include 1200 new schools (in addition to 3112 schools currently under construction and more than 770 schools completed in FY 2009) and rehabilitation of 2000 existing school buildings.

      For higher education, the new budget includes appropriations for the construction of four new campuses for the newly established universities. Furthermore, scholarship abroad program will continue next year, with focus on technical trainers.
 

2.   Health and Social Affairs:

a.      Total expenditure amounts to SR 61.2 billion ($16.3 billion), an increase of 17 percent over FY 2009 appropriation.

b.      Projects include new primary care centers throughout the Kingdom, 92 new hospitals with a capacity of 17,150 beds.

c.       For social services, the new budget includes appropriation to build sport clubs, social centers, social welfare and labor offices. In addition, it includes further support for poverty reduction programs.  

3.   Municipality Services:

a.      Total expenditure amounts to SR 21.7 billion ($5.8 billion), an increase of 15 percent over FY 2009 appropriation.

b.      New projects include inter-city roads, intersections and bridges, and road lights.  It also includes sanitary and other environment-related projects. 

4.      Transportation and Telecommunication:

a.      Total expenditure amounts to SR 23.9 billion ($6.4 billion), an increase of 24 percent over FY 2009 appropriation.

b.      New projects include roads totaling 6,400 kilometers (km) to be added to 35,000 km of roads currently under construction, ports, airports, railroads development, and new postal services. 

5.      Water, Agriculture, and Infrastructure Sector:

a.      Total expenditure amounts to SR 46.0 billion ($12.3 billion), an increase of 30 percent over FY 2009 appropriation.

b.      Appropriations for new projects include enhancing water sources, dams and wells, as well as improving water and sewage networks.  There are also allocations for new water desalination plants and upgrading existing ones.  Moreover, these appropriations include new projects will be undertaken in the two industrial cities of Jubail and Yanbu to attract domestic and foreign investments. 

6.   Specialized Credit Development Institutions and Government Financing Programs:

Specialized government development funds and banks will continue to provide loans to the industrial and agriculture sectors, which should help in creating jobs and enhancing growth prospects.

It is projected that SR 48.3 billion ($12.9 billion) will be disbursed by Government Specialized Credit Institutions (Real Estate Development Fund, Saudi Industrial Development Fund, Saudi Credit and Saving Bank, Agriculture Development Fund, Public Investment Fund, and Government Lending Program) in 2010.  The total value of loans provided by these institutions since their inceptions amounts to more than SR 388.4 billion ($103.6 billion). 

Economic Developments in 2009 

1 - Gross Domestic Product (GDP)

According to the Central Department of Statistics and information, GDP is estimated in 2009 to be SR 1,384.4 billion ($369.2 billion) in current prices, reflecting a contraction of about 22.0 percent compared to 2008.  Non-oil GDP is estimated to grow by 5.5 percent. This growth is mainly attributed to the government stimulus program.  Private sector is estimated to grow by 2.85 percent in current prices in 2009.

In real terms, overall GDP is estimated to grow by 0.15 percent.  However, non-oil GDP is estimated to grow by 3.0 percent, with government sector growing by 4.00 percent and private sector by 2.54 percent in 2009. All components of the GDP recorded positive growth in 2009, except the oil sector.  In particular, the industrial sector is estimated to grow by 2.20 percent; construction sector by 3.90 percent; electricity, gas, and water sector by 3.35 percent; transport and communication sector by 6.00 percent; wholesale, retail, restaurants, and hotels by 2.00 percent; and finance, insurance and real estate by 1.80 in constant prices. In addition, private sector contribution to GDP is projected to be 47.80 percent in constant prices.

2 - General Price Level

Inflation, as measured by the cost of living index, is estimated at 4.40 percent in 2009, while the non-oil GDP deflator showed an increase of 2.40 percent.

3 - Foreign Trade and Balance of Payment

The Saudi Arabian Monetary Agency (SAMA) estimates the total value of exports of goods and services at SR 691.6 billion ($184.4 billion) in 2009, representing a contraction of about 41.0 percent compared to 2008. Non-oil exports of goods are estimated at SR 101.8 billion ($27.1 billion), reflecting a decline of 16.4 percent and representing 15.0 percent of total goods exported.

Total imports of goods are estimated at SR 301.3 billion ($80.4 billion) in 2009, representing a decline of 21.0 percent compared to 2008.

According to SAMA preliminary data, trade balance is estimated to record a surplus of SR 390.3 billion ($104.1 billion) in 2009, a decline of 50.9 percent compared to last year, as a result of the decline in oil price and quantity as well as non oil exports. 

Current account is estimated to record a surplus amounting to SR 76.7 ($20.5) billion in 2009 compared to SR 496.2 billion ($132.3 billion) in 2008, a decline of 84.5 percent.

4 - Money and Banking

The broad money supply during the first ten months of FY 2009 grew by 8.0 percent.  Bank deposits recorded a growth rate of 8.2 percent during the first ten months of 2009 and total banks claims on public and private sectors declined by 5.7 percent.  Banks’ capital and reserves increased by 24.1 percent reaching SR 163.6 billion ($43.63 billion).

5 - Capital Market

The Capital Market Authority (CMA) continued its efforts to develop the bonds market and improve the transparency, fairness, and investors’ protection.

On deepening the financial market and providing more investment opportunities, the CMA has approved 10 IPOs totaling about SR 26.6 billion ($7.1 billion) It has licensed 24 mutual funds and 14 new brokerage and portfolio management firms, increasing the number of licensed firms to 124.

6 - Other Developments

a.      The 2009 Article IV Consultation of the IMF with Saudi Arabia concluded that the prospect of Saudi Arabia’s economy is positive and the performance of non-oil sector will remain strong.

b.      Standard and Poor’s (S&P) Ratings maintained Saudi Arabia sovereign rating at (AA-).

c.       The IFC 2010 Report on Ease of Doing Business ranked Saudi Arabia at 13 among 183 countries, up from rank 15 in 2009 Report.

d.  
New fiscal, institutional, and structural reforms have been introduced in 2009.  These included restructuring of Agriculture Development Fund, the creation of the National Committee for Clean energy Development, National Plan for Nuclear and Radiation Emergency, Tax Incentives for Investment in Some Geographical Areas, By-Laws for non-profit Technical and Vocational Training, and rules for dealing with national employees in sectors slated for privatization, among others.