Saudi Arabia’s 2015 Budget Maintains Strong Spending, Diversification Initiatives

Saudi Arabia released its 2015 national budget, a continuation of the prior year’s diversification plan, which demonstrates the government’s ongoing efforts to boost long-term non-oil development through focused investment programs.  Focuses include education, infrastructure, health, social services, security services, municipal services, water and water treatment services, and roads and highways. The budget also aims to balance current spending such as salaries, wages, and allowances, which represent approximately 50 percent of total budget expenditures.  In the coming year, education, healthcare, science, technology, and e-governance projects will continue to be priority sectors.

Saudi Arabia has set a state budget for 2015 with total revenues projected to reach $190.7 billion (SR715 billion) and total spending valued at $229.3 billion (SR860 billion) which is expected to result in a $38.6 billion (SR145 billion) deficit.  Budget revenues for 2014 are projected at $278.9 billion (SR1.046 trillion), leading to an estimated deficit of $14.4 billion (SR54 billion).  

The 2015 national plan is an extension of previous developmental plans.  Education and healthcare remain the priority of the Kingdom’s budget, representing 44 percent of total spending.  Education continues to receive the largest share of the budget at 25 percent of the total allotment, among the highest in the world.  Health and social affairs allocations account for 14 percent of the budget and the largest increase of any allocation with 48 percent growth.

Education and Training

  • Total expenditure: $57.9 billion (SR217 billion)

Saudi Arabia dedicated $57.9 billion (SR217 billion) to education and training, a 3 percent increase from the 2014 allocation.  The budget features funding for 164 new projects worth $3.7 billion (SR14 billion) and an additional $1.8 billion (SR6.8 billion) for existing projects.  General education received $108 million (SR405 million) for projects to rehabilitate 500 school buildings and 11 sport centers.  Higher education was allotted $3.28 billion (SR12.3 billion) which will go towards opening three new universities and finishing projects on several college campuses.  An estimated $640 million (SR2.4 billion) has been allocated to build new vocational and technical colleges, complete additions to existing projects, and operate Colleges of Excellence. To support scholarship programs, $6 billion (SR22.5 billion) was earmarked for over 207,000 Saudi students studying abroad and their families, up slightly from $5.9 billion (SR22 billion) earmarked in 2014.

Health and Social Affairs

  • Total expenditure: $42.7 billion (SR160 billion)

The health and social affairs expenditure accounts for 18.6 percent of the total budget, the second highest figure this year.  Allocations for health and social affairs spending grew by 48 percent compared to the 2014 budget to reach $42.7 billion (SR160 billion) in the 2015 budget.  Across the country, 27 new hospitals and health facilities will be built in addition to continuing construction at 117 hospitals and eight medical cities.  In 2014, hospital construction added more than 4,500 beds to the country’s capacity. Upon completion of all facilities currently under construction, total capacity in the country will increase by more than 24,000 beds. The budget also includes funds to build 16 sports clubs, five centers for individuals with special needs, and social welfare and labor offices.  Additionally, the budget provides an $8 billion (SR30 billion) appropriation to support social welfare, special needs citizens, and poverty programs.

Water, Agriculture, and Related Infrastructure

  • Total expenditure: $16 billion (SR60 billion)

Water, agriculture, and infrastructure projects have been allocated $16 billion (SR6 billion) in 2015.  An estimated $6.1 billion (SR23 billion) will be spent to increase water resources, funding new projects such as building dams and desalination plants, using deep aquifer wells, and expanding and improving water and water treatment networks.  Additionally, funds are allotted for new grain silos projects and industrial cities’ infrastructure and services. Projects under construction approved in prior fiscal years still have $37.9 billion (SR142 billion) remaining in their costs.

Infrastructure and Transportation

  • Total expenditure: $16.8 billion (SR63 billion)

The infrastructure and transportation sectors have been allocated $16.8 billion (SR63 billion).  An estimated $8.9 billion (SR33.5 billion) will be spent to fund nearly 2,000 kilometers of new roads, airport upgrades and expansions, railways, sea ports, and infrastructure projects at Jubail, Yanbu, and Ras Al-Khair.  Projects under construction approved in prior fiscal years still have $30.7 billion (SR115 billion) in their remaining costs.

Municipality Services

  • Total expenditure: $10.7 billion (SR40 billion)

The budget designates $10.7 billion (SR40 billion) to municipal services, $1.47 billion (SR5.5 billion) of which is financed from municipality revenues.  The spending will go to new intercity roads, bridges, rain drainage, control systems, and flood fighting.  New and ongoing projects for intercity roads, bridges, drainage, and control systems will receive $6.7 billion (SR25 billion). Meanwhile, projects under construction approved in prior fiscal years have $38.4 billion (SR144 billion) remaining in their costs.

Specialized Credit Development Institutions and Government Financing Programs

  • Total expenditure: $19.7 billion (SR73.7 billion)

The Kingdom’s specialized credit institutions will continue to provide loans to support job creation and increase growth prospects.  Under the 2015 budget, the Real Estate Development Fund, Saudi Industrial Development Fund, Saudi Credit and Saving Bank, Agriculture Development Fund, Public Investment Fund, and Government Lending Program will disburse approximately $19.7 billion (SR73.7 billion).  Total financing provided by these institutions since their inception has surpassed $156.5 billion (SR587 billion).

The 2015 budget will reach a new record for Saudi state spending while the country’s reserves remain strong. As of November 2014, the Saudi Arabian Monetary Agency’s government reserves totaled $241.3 billion (SR905 billion).

Economic Review of 2014

Preliminary macroeconomic data for 2014 indicate that the Saudi economy continued its strong performance from prior years. For 2014, the Ministry of Finance estimates that real GDP is expected to reach 3.59 percent compared to 2.67 percent in 2013.  Over the same period, inflation remained low at 2.7 percent for 2014. In current prices, nominal GDP is anticipated to reach $752.5 billion (SR2.822 trillion), a 1.09 percent increase compared to 2013. Meanwhile, non-oil GDP is expected to grow by 8.21 percent, the non-oil public sector is expected to increase by 6.06 percent, the non-oil private sector is expected to increase by 9.11 percent and the oil sector is estimated to decline by 7.17 percent. The total outstanding public debt is projected to fall to $11.8 billion (SR44.3 billion), equivalent to 1.6 percent of GDP.

The Kingdom has not slowed oil production since the price of oil began to decline in September amid lower global demand and increased supply stemming from shale and natural gas production.  As a result, the oil sector is expected to grow by 1.72 percent while the government sector grew by 3.66 percent.  Continued robust government spending and 2,572 projects signed with the private sector, valued at $49 billion (SR184 billion), helped support economic diversification measures despite challenges with ongoing regional uncertainty and oil price fluctuations.  

Non-oil GDP grew in 2014 with non-oil industrial private sector increasing by 6.54 percent. Sectors with the highest growth rates included construction (6.7 percent), transportation, storage, and communications (6.13 percent), wholesale, retail, restaurants, and hotels (5.97 percent), and finance, insurance, and real estate (4.46 percent).

While the 2014 budget originally envisaged revenues of $228 billion (SR855 billion), they actually amounted to $278.9 billion (SR1.046 trillion).  Expenditures, originally estimated at $228 billion (SR855 billion), stood at $293.3 billion (SR1.1 trillion).  This increase is 28 percent above the budgeted level but not significantly higher than the average amount of overspending recorded over the last ten years.  This resulted in a budget deficit of $14.4 billion (SR54 billion) in 2014.  Additional unbudgeted expenses in 2014 included spending on projects for the Two Holy Mosques, additional development and service projects, and international aid.

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