The economic and financial prospects of Saudi Arabia, along with its prominent developments are presented in each fiscal year through announcing the annual budget estimates and projections, including revenues, expenditures, gross domestic product (GDP), and comparing the deficit and surplus. The MoF sets the policies for Saudi Arabia’s budget with complete transparency within the international standards, announcing its challenges for the upcoming years and keeping pace with the economic changes in raising the GDP and reducing Saudi Arabia’s dependence on oil products.

Saudi Arabia’s Budget Statement

The MoF presents Saudi’s annual budget and prepares quarterly reports, citizen’s reports, performance reports, etc, which reinforces transparency and allows everyone to read the budget’s data. Moreover, the government makes the Government Performance Indicators (GPI) available, as well as the budget of each ministry on its website.

Revenues

Saudi Arabia has oil and nonoil revenues, in addition to zakat and taxes.

Expenditure

Saudi Arabia spends its budget on operating expenses, such as employee compensations, stimulating the private sector, Vision 2030 programs, and social benefits along with capital expenditure for development and economic growth.

Transparency in Government Spending

Saudi Arabia's budget is linked to realizing Saudi Vision 2030 objectives and goals. The MoF is required to highlight the transparency of its preparation and budgets to ensure sustainability to fulfill the nation's aspirations.Saudi Arabia's budget is subject to legislative and regulatory scrutiny and is based on the regime.

The Basic Statute of Governance and the annual laws for budget approvals require all government entities to apply the principles of budgetary governance:

1. Transparent, credible and predictable limits for fiscal policy.
2. Align with Vision 2030 and other national strategic plans and priorities.
3. Inclusive and participative debate on budget planning.
4. Budget documents and data are open, transparent and accessible.
5. A comprehensive, accurate and reliable account of the public finances.
6. Actively plan, manage and monitor budget execution.
7. Performance, evaluation and value for money are integral to the budget process.
8. Identify, assess and manage prudently longer-term sustainability and other fiscal risks.

To ensure government spending transparency, each entity must submit quarterly and annual reports to the MoF. Following the reports of the government entities, the MoF is legally obliged to publish quarterly financial performance reports on the execution of the budget, along with final annual account summaries in the detailed annual reports of expenses and revenues.Also, the Etimad platform plays a significant role in increasing transparency and raising the efficiency of expenditure for its users, such as government and supervisory entities, contractors, suppliers, vendors, etc. All government entities are obliged to use the platform for procurements of services, goods, works, and payments.

Budget Cycle

Preparation

The budget preparation stages start from the end of December of the last fiscal year to January. By the beginning of February, the main trends of the budget are determined. From mid-March, the budget is subject to initial review and analysis until the end of April. It is then discussed and reviewed from May until the end of August.The budget preparation is subject to a number of specific rules, namely, commitment to the annual period and submission of estimates, where resources and expenses are general. The budget requires revenues to be equal to expenses taking into account tabulating and analyzing changes. The budget must also determine an expenditure limit in addition to presenting a standard budget that includes all expenditures and revenues in one statement.Preparing the budget requires the availability of financial and economic competencies combined with knowledge and technical skills, strategic thinking and leadership, a deep understanding of policies and regulations, and advanced financial analysis capabilities.

Approval

Budget approval goes through three stages: starting from initial analysis throughout July, August and September, then final approval within October and November and finally, the official release in December.

Implementation

The MoF adopts four tracks in the implementation of the budget:

1. To announce the budget in order to disseminate its instructions
2. To be implemented by a collection of its revenues and commitment to its expenses and provisions
3. To estimate its quarterly performance
4. To prepare the final account where entities submit their accounts at the end of the fiscal year.

Automation programs, such as the digital platform (Etimad), ensure the preparation and implementation of the budget expenditure models, budget preparation and implementation system, business intelligence system, data governance and management enhancement program.Communication with government entities is being carried out through introductory workshops, budget forum and the media plan for the budget, and releasing the activating roles of supporting bodies.The Etimad platform plays a role in increasing transparency and raising the efficiency of expenditure for its users, such as government and supervisory entities, contractors, suppliers, vendors, etc.

2023 Budget

The Council of Ministers approved the Annual Budget for the fiscal year 2023, with a total approved expenditure of SAR 1,114 billion, estimated revenues of SAR 1,130 billion and an estimated surplus of SAR 16 billion (0.4%of GDP).

Budget 2023 supports the continuation of fiscal sustainability and focuses on completing the process of economic and structural reforms aimed at strengthening Saudi Arabia's fiscal position, enhancing the economy's resilience, and keeping pace with rapid global changes. In addition, it continues to implement programs and projects that support growth, expand the economy, and achieve inclusive development.

Over the past years, the government has succeeded in achieving the main objective of fiscal reforms in its first phase the “Fiscal Balance Program", which was aimed at controlling high deficit rates to reach medium-term fiscal balance. While the second phase of fiscal reform the “Fiscal Sustainability Program”, which also focuses on developing sustainable fiscal indicators and policies in the medium- and long-term. This is delivered through stable spending levels directed towards strategic expenditure that supports structural change of the economy. This will achieve the objectives of Saudi Vision 2030 and is within a framework that ensures maintaining sufficient levels of reserves and sustainable amounts of public debt.

For the next year and in the medium term, the budget is aimed at continuing to implement giga projects and previously announced initiatives, such as the National Transformation Program, National Industrial Development and Logistic Program, Quality of Life, Pilgrim Experience Program, and Saudi Green Initiative, and other programs, initiatives, and projects that will bring about positive structural changes that promote the improvement in the economic base and the quality of life for citizens and residents and of the services provided to them. The budget also aims to raise the contribution of investment to GDP, enhance the investment environment, and build investors' trust in the economy through providing investment enablers and incentives, and promoting transparency.

The government's determination is to continue its efforts in raising spending efficiency and fiscal control, as it aims to achieve comprehensive development at regional and sectoral levels and develop promising sectors that contribute to achieving economic and social returns in the medium- and long-term, as well as localizing military industries, as Saudi Arabia continues to implement programs and initiatives of the social support and protection system. Preliminary estimates for 2023 indicate the growth of real GDP at a rate of 3.1%.

The economic and fiscal reforms that Saudi Arabia implemented continue to drive growth despite the challenges and crises facing the world's economies, which affect the future growth of the global economy and its future prospects, such as the food crisis, inflation, supply chain disruption and geopolitical conditions. 

Additionally, the government's proactive steps in mitigating the economic and social impacts of these crises, as well as the economic and fiscal reform packages, which have been balancing between increased spending, fiscal stability, and sustainability that support economic recovery. This is in addition to implementing strategic projects, increasing social protection programs, and supporting strategic stocks of basic materials while accelerating the implementation of some programs and projects to advance the realization of Saudi Vision 2030. Also, the budget's projection for inflation will fall to 2.1% for 2023 and is expected to stay at normal levels in the medium term.

Moving forward, the partnership between government entities has contributed to many reforms in preparing the annual budget and raising the quality of its implementation. Moreover, partnership with the private sector has enhanced opportunities to enable it to be the main driver of economic growth and the largest contributor to creating jobs for citizens.

The balance of the public debt is expected to reach SAR 951 billion (24.6% of GDP) in 2023, compared to SAR 985 billion (24.9% of GDP) in 2022, noting that it is expected that local and external borrowing will continue to repay the outstanding debt in 2023 and over the medium term. Moreover, available opportunities will be seized according to market conditions to proactively implement additional financing for the principal debt over the coming years. This is in addition to financing some strategic projects and exploiting market opportunities to implement alternative government financing to finance the transformational spending of capital projects and infrastructure.
Also, the balance of government reserves is estimated to reach SAR 399 billion by the end of 2023, as a result of strengthening reserves with a portion of the expected surpluses to maintain safe levels of government reserves to enhance the government's fiscal position and its ability to deal with external shocks.

Key Fiscal Targets for FY 2023

Saudi Arabia’s government aims to continue the process of economic and fiscal reforms that it conducted under the umbrella of Vision 2030 and maintaining fiscal sustainability. These reforms include adopting fiscal policies that contribute to maintaining fiscal sustainability, improving public financial management, and raising the quality of fiscal planning to enhance economic growth and the most efficient use of resources. The fiscal policy in the medium-term also aims to strengthen Saudi Arabia’s financial position to encounter external shocks through maintaining government reserves at appropriate levels and the sustainability of public debt indicators.

In this context, the budget for FY 2023 reflects progress in implementing programs and projects supporting economic growth and diversification, improving public services, and strengthening programs for social benefits and subsidies schemes, all while preserving the gains made in previous years on the public finances front. The FY 2023 Budget is projected to achieve a surplus of around 0.2% of GDP, with the expectation that budget surpluses will continue to be achieved in the medium-term, which will strengthen fiscal sustainability. It is worth noting that the amounts of budget surpluses will be directed to bolstering government reserves, supporting the national funds, considering the possibility of accelerating the implementation of some strategic programs and projects of economic and social dimensions, as well as partially repaying the debt based on market conditions; this is within the budget surpluses’ utilization mechanism under the FSP.

Expenditures

Within the framework that Saudi Arabia’s government is executing towards strengthening public finances and achieving developmental and economic objectives, the estimates of expenditure ceilings over the medium-term are continuously reviewed and updated according to the results of the fiscal reforms and economic developments. In view of the increase in non-oil revenues that Saudi Arabia’s economy is witnessing and its positive impact on the fiscal space, expenditure ceilings were reviewed upward over the medium-term to reflect the rise in structural revenues without affecting the achievement of the fiscal sustainability objectives while enabling the acceleration of the implementation of regional and sectoral strategies.

The Government is moving forward with the process of economic and structural reforms aimed at enhancing economic growth and fiscal sustainability, through raising the efficiency and effectiveness of spending and fiscal discipline, taking into consideration the economic conditions the world is witnessing at all levels. The government places great importance on the social support and protection schemes to assure and protect citizens from being affected by domestic and global ramifications. The government is also keen to continue empowering the private sector and stimulating the investment environment in Saudi Arabia, in addition to implementing the mega projects and programs to achieve the objectives of Saudi Arabia’s Vision 2030 and have an economic and social dimensions and impact. This will also positively contribute to achieving higher economic growth in the coming year and over the medium-term. Total expenditures are projected to reach around SAR 1,114 bn in the coming FY 2023, and are estimated to reach around SAR 1,134 bn in 2025.

Sectoral Performance

Expenditure is expected to increase by the end of the current fiscal year on the municipal services sector by about 58.8% to reach SAR 61 billion compared to the same period last year, as a result of the increase in spending on projects for rainwater drainage stations and networks; warding off the dangers of floods; as well as addressing visual defacement in vital locations; in addition to the development, equipping and establishment of gardens, municipal squares and green spaces; and increasing spending on service construction, including the construction of squares, parks, railways and train stations. It should also be noted that spending on the military sector and general items increased by about 21.4% and 13.0%, respectively, compared to FY 2021, while spending on the infrastructure and transportation sector is expected to decrease by about 8.8% compared to the previous FY 2021.

Sector	Actual 2021	Budget 2022	Estimates 2022	Annual Change* (Actual 2021 - Estimates2022
Public Administration	34	32	36	4.0%
Military	202	171	245	21.4%
Security and military areas	106	101	110	3.0%
Municipal services	39	50	61	58.8%
Education	192	185	195	1.8%
Health and social development	197	138	198	0.6%
Economic resources	71	54	75	4.8%
Infrastructure and transportation	51	42	47	-8.8%
General terms	147	182	166	13.0%
Total	1,039	955	1,132	9.0%

Expenditures by Sector in the Budget for FY 2023 

Below is a list of the most notable programs and projects to which expenditures will be directed in each sector.

Economic Resources Sector
Sector Allocation in FY2023Budget	SAR 72 billion
Key Projects Planned for FY 2023
Scope	Objective
Environment, Water and Agriculture	Increasing the percentage of drinking water coverage for the population to 88.7% increasing the percentage of sanitation service coverage for the population to 65.5%, and increasing the average daily pumping hours for the serviced neighborhoods by 21.5 hours by the end of FY 2023. Achieving food security by increasing annual lending to finance the credit portfolio for FY 2023 with SAR 6.5 billion, supporting sustainable rural agricultural development with SAR 500-600 million according to the comparative advantages of the regions. Construction of 33 dams with a storage capacity of 507 million m3, in addition to drilling 19 wells in various regions of Saudi Arabia to increase the coverage of water supplies to remote areas by 36 thousand m 3 per day. Establishment of the regional center for climate change in Jeddah, and the establishment of the regional center for early warning of dust and sandstorms. For more information about the budget of the Environment and Agriculture sector, click here.
Energy	Developing and posting 10 renewable energy projects with an estimated capacity of 7 gigawatts to provide commercial opportunities and enhance the efforts of localization programs and local content. Implementing the national strategy for petrochemicals to convert 4 million barrels per day of petroleum and gas liquids into petrochemicals inside and outside Saudi Arabia. Reducing the consumption of diesel fuel in the production of electric power by 5,062 barrels and connecting its users to the electrical grid. Enhancing Saudi Arabia's electrical interconnection with countries and the trade exchange of electricity to maximize the benefit from Saudi Arabia's strategic location to be a global center for interconnection and export of electric power. For more information about the budget of the Energy sector, click here.
Commerce	Building a disaster recovery center to restore services and business (Disaster Recovery Site) to ensure business continuity and avoid disasters that lead to disruption of the entity's operations and customer service problems. Expanding the geographical coverage of commercial attaches to develop trade exchange, enhancing the role of the private sector in international trade through the Saudi foreign business councils, introducing representatives of counterpart countries to the climate and trade opportunities, and overcoming trade obstacles. Automation of price monitoring and supply stock follow-up in order to monitor the price movement of commodities and control stock provision. For more information about the budget of the commerce sector, click here.
Industry and Mineral Resources	Localizing qualitative industries in 10 sectors, including the automotive industry, marine industries, medical and pharmaceutical industries, by activating the National Strategy for Industry. Attracting qualitative industrial investments to the cities of the Royal Commission for Jubail and Yanbu, with investments estimated at SAR 24.8 billion, and providing approximately 7,200 job opportunities. The development of industrial sites for the Royal Commission with an area of about 8 million m 2 to attract industrial investments. Establishing 105 ready and functioning factories in the Jazan Industrial City, Qassim Industrial Oasis, and Dammam Second Industrial City, to complete the infrastructure services of the industrial cities, and increase the percentage of investment opportunities for factory owners. Supporting promising industries by developing 44 promising investment opportunities in the machinery and equipment sector, to increase the size of local industry and reduce the volume of imports. Supporting the basic supply chains of the aviation industry by developing 10 promising investment opportunities to bring about highly advanced industries and transfer knowledge in the aviation industry to Saudi Arabia. Registering the trademark for the phrase "Made in Saudi" in the Gulf Cooperation Council (GCC) and the identified regional, Islamic and global countries to enhance the international presence.
Tourism	Achieving 834 thousand jobs in the tourism sector by enabling the growth of the tourism sector that is directed at the local and international tourists, as it contributes to reducing unemployment rates and creating new job tracks and professions in the labor market, with approximately 1.6 million tourism jobs, as defined in the National Strategy for Tourism. Achieving 5.2% as a percentage of the tourism sector’s contribution to Saudi Arabia’s GDP, emanating from the National Strategy for Tourism, by enabling the growth of the tourism sector that is directed at local and international tourists.