The Saudi Government has announced an economic stimulus budget for the 2009 fiscal year, valued at $126.7 billion (SR475 billion). As the largest in the Kingdom’s economic history, the upcoming budget represents an increase of 15.8 percent, or $17.3 billion (SR65 billion), in public spending, compared to its 2008 counterpart. The 2009 budget demonstrates the Saudi Government’s ongoing commitment to developing infrastructure and improving social services. At the same time, the budget reflects fiscal prudence in an environment characterized by a global economic downturn, rising inflation, high monetary supply, and fluctuating oil prices.

Projected revenues have decreased from $120 billion (SR450 billion) in 2008 to $109.3 billion (SR410 billion) in 2009, largely as a result of a decline in the price of oil, which accounts for 88 percent of the Kingdom’s revenues. As such, the budget is estimated to yield a fiscal deficit of $17.3 billion (SR65 billion), compared to a surplus of $10.6 billion (SR40 billion) in 2008.

 

The 2009 budget includes a record $60 billion (SR225 billion) for new projects, as well as existing ones. The budget represents a 36 percent increase in capital spending over 2008 and demonstrates the Saudi Government’s focus on developing capital programs that will generate employment opportunities for the country. Qualitative improvements to social and physical infrastructure, as well as education and training, also continue to be a priority.

Highlights of the 2009 National Budget

Education and Manpower Development

 

Total expenditure: $32.6 billion (SR122.1 billion)

 

Accounting for more than a quarter of the entire budget, the appropriation for education and manpower development aims at bolstering the Kingdom’s academic and human resource base. Appropriation funds will be allocated across all levels of education, but a particular focus will be on primary and secondary schooling. Approximately 1,500 new primary and secondary schools will be constructed, in addition to the 3,240 currently under development and another 2,000 under renovation. Expenditures also include the King Abdullah Project for Education Development, amounting to $2.4 billion (SR9 billion). The project, which will be executed over the next six years, will be responsible for developing a high-tech classroom environment in the Kingdom.

 

The appropriation for higher education includes funds for the construction of the new women’s university, Princess Norah University in Riyadh and the Medical City for King Saud University. Additional funds will go toward the King Abdullah Scholarship Program, which has funded the tuition of more than 42,000 Saudi students over the past six years. Further, the implementation of the $2.1 billion (SR8 billion) National Plan for Science and Technology is underway.

 

Total expenditure: $13.9 billion (SR52.3 billion)

As part of an effort to modernize the country’s public healthcare system, a significant portion of the appropriation for health and social affairs will cover the cost of medical staffing. Further, approximately 86 new hospitals will undergo construction, with a total bed capacity of 11,750. In 2009, the Kingdom will also continue to develop the Saudi Red Crescent, a counterpart of the Red Cross. In terms of social services, the new budget includes projects for the construction of sport clubs, social centers, and social welfare and labor offices. Funds for housing and programs for disabled care and poverty reduction are also included in the 2009 budget.

Water, Agriculture, and Infrastructure

 

Total expenditure: $9.4 billion (SR35.4 billion)

Of the total appropriation set aside for the water, agriculture, and infrastructure sectors, the Saudi Government has allocated $3.54 billion (SR13.3 billion) for water, sewage, and desalination projects. In addition, the industrial cities of Jubail and Yanbu, as well as other industrial and agricultural projects in the Kingdom, will receive funds.

Municipal Services

 

Total expenditure: $5.3 billion (SR19.8 billion)

 

Funding for municipal services includes the construction of storm-water canals, intercity roads, bridges, and traffic lights. Additional funds will be allocated for sanitary, trash-collection, and other environment-related projects, including coastal beautification.

 

 

Total expenditure: $5.2 billion (SR19.2 billion)

The appropriation for transportation and telecommunications entails the construction of new roads totaling 5,400 kilometers (3,355 miles), in addition to 30,000 kilometers (18,641 miles) of roads currently under construction across the Kingdom. The Saudi Government also plans to develop the Kingdom’s airports, ports, and railways, and implement new postal services.

Specialized Credit Development Institutions and Government Financing Programs

 

The Saudi Government has allocated funds to replenish the resources of the Real Estate Development Fund by $6.7 billion (SR25 billion) over five years. Further, an estimated $2.7 billion (SR10 billion) will be deposited to the Saudi Credit and Savings Bank in 2009.

 

Approximately $10.7 billion (SR40 billion) is expected to be disbursed in 2009 by Government Specialized Credit Institutions, which include the Saudi Industrial Development Fund, Saudi Arabian Agricultural Bank, Public Investment Fund, and Government Lending Program, in addition to the Real Estate Development Fund and Saudi Credit and Savings Bank.

 

In addition to announcing the 2009 budget, the Saudi Government has released economic indicators for 2008. The Ministry of Finance projects revenue in 2008 to reach $293.3 billion (SR1.1 trillion) with total expenditures amounting to $136 billion (SR510 billion) and a resulting surplus of $157 billion (SR590 billion). According to the Central Department of Statistics, the Kingdom’s Gross Domestic Product (GDP) is projected to grow by 22 percent in 2008, reaching $467.5 billion (SR1.75 trillion). The oil sector alone is estimated to grow 34.9 percent.

The private sector is also expected to perform well in 2008 with growth estimated at 8 percent. The sector’s contribution to overall GDP is estimated at 46 percent. The total number of government projects signed with the private sector in 2008 numbered 2,500 with a total value of $32 billion (SR120 billion). Private sector GDP is forecast to grow by 4.3 percent. More specifically, the non-oil industrial sector is expected to grow by 5.4 percent; construction sector by 4.1 percent, electricity, gas, and water sectors by 6.3 percent; transportation and telecommunications sectors by 11.4 percent; wholesale, retail, restaurants, and hotels by 4.2 percent; and financing, insurance, and real estate by 2.2 percent.

The Central Department of Statistics also projects Saudi Arabia’s total exports of goods and services in 2008 to grow by 31.2 percent, reaching a value of $326.9 billion (1.23 trillion). Non-oil exports are expected to reach $30.7 billion (SR115 billion), an increase of 10 percent over 2007. Total imports of goods and services are projected to increase by 12 percent, reaching $162.7 billion (SR610 billion). According to the Saudi Arabian Monetary Agency (SAMA), Saudi Arabia will record a trade surplus of $218.7 billion (SR820.2 billion).