(MENAFN- Khaleej Times) Saudi Arabia will increase government spending next year and slow an austerity drive as it struggles to lift the Economy in the face of low oil prices, according to a state budget released on Tuesday.
Riyadh plans to boost spending to a record SR978 billion ($261 billion) in 2018, the finance Ministry said. That is up from SR890 billion in the original 2017 budget plan.
As a result, the pace of decline in the government's budget deficit will slow next year. The 2018 deficit is projected at SR195 billion against an actual SR230 billion in 2017.
In a speech, the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz formally announced that the target date for eliminating the deficit would be pushed back to 2023, from the original target of 2020. Finance ministry officials had already informed local economists of the change last month.
By imposing new taxes and slashing spending in some areas, Riyadh has been battling to bring down its deficit since 2015, when lower oil export revenues produced a record budget gap of SR367 billion or about 15 per cent of GDP.
The austerity drive has restored investor confidence in the Saudi currency and financial markets but taken a heavy toll on the economy, where private sector growth has slowed. Data for the first half of 2017 showed the overall economy in slowdown, partly because of cut-backs in oil output.
That has prompted the government to cut an unemployment rate among Saudi citizens that is officially put at 12.8 per cent, to plan on loosening its purse strings next year.
Revenues are estimated to be SR783 billion ($208.8 billion) and spending is expected to be SR978 billion, the highest in the oil-rich kingdom's history.
The new budget was announced during a cabinet meeting chaired by King Salman who said the world's top oil exporter would "continue to decrease its dependence on oil to reach just 50 per cent" of total revenues.
Saudi Arabia announced its budget deficit narrowed in 2017 to below 10 per cent of economic output for the first time since the collapse in oil prices battered public finances.
The shortfall dropped to 8.9 per cent of gross domestic product from almost 13 per cent in 2016, the official Saudi Press Agency reported late on Monday, citing Finance Ministry official Yarub Al Thunyan.
A smaller deficit would be a welcome boost for the kingdom as it grapples with lower oil revenue after prices of crude plummeted in 2014, causing the budget deficit to surge to about 15 per cent of GDP the following year.
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