Moody’s Investors Service said that Saudi Arabia’s planned expenditure cuts will support the kingdom’s achievement of its challenging balanced budget objective by 2023.
Saudi had already announced plans to secure a balanced budget by 2023 by closing budget deficit.
The kingdom on Monday released its 2020 budget, indicating expected total expenditure of 1.02 trillion Saudi riyals ($272 billion) compared to a forecast for actual expenditure of 1.048 trillion riyals in 2019.
The budget deficit for 2020 is expected to be at 187 billion riyals (6.4 percent of GDP), while the expected deficit is forecast to reach 131 billion riyals in 2019 (4.7 percent of the estimated 2019 GDP).
“The 2020 budget is in line with the pre-budget statement published in October. The government’s intention to cut spending in 2020 – in addition to planned spending cuts relative to what has been budgeted for 2019 – is credit positive and raises the likelihood of achieving the balanced budget objective by 2023,” Alex Perjessy, a Moody’s vice president said.
“However, implementation will be challenging not least because of a history of overspending relative to budget targets, but also given the government’s simultaneous desire to ensure a steady rate of non-oil GDP growth, support economic diversification and further reduce the unemployment rate. Public finance management reforms put in place in 2019, including the implementation of a new electronic payment and tracking system will help,” Perjessy added.
The ratings agency had commented on the pre-budget statement in November, saying that under the revised Fiscal Balance Program (FBP), the Saudi government aims to reduce spending by 124 billion riyals between 2018 and 2022 and that is a significant change from previous FBP versions, which targeted rising expenditure over the same four-year period.
(Writing by Gerard Aoun; editing by Seban Scaria)
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