Saudi Budget 2023: Comprehensive Analysis with Figures and Economic Trends

The general budget in the Kingdom of Saudi Arabia represents the annual financial plan that defines the state's expected revenues and expenditures for a specific fiscal year. The mechanisms for approving the Saudi budget differ from countries with legislative parliaments, as it is enacted by royal decree following discussion in the Council of Ministers and ratification by the King. The budget serves as a guiding tool for the state's economic policies and is used to achieve development and spending priorities in line with Vision 2030. In the financial context, the budget directly and indirectly affects the Saudi stock market (Tadawul), as allocating spending to major development projects stimulates key sectors such as contracting, energy, industry, and technology. The budget is also a significant indicator in assessing the Kingdom's credit rating by international agencies, given its substantial reliance on oil revenues, which often constitute more than half of total public income.

Actual revenues for the Saudi Budget 2023 exceeded SAR 1 trillion, driven by higher oil prices in the first half of the year and improved non-oil revenues thanks to new taxes and fees. On the expenditure side, the Ministry of Finance set public spending at around SAR 1.1 trillion, an increase of over 5% from the previous year. These expenditures included fuel and electricity subsidies, public sector salaries, housing programs, infrastructure, defense and security, education, and health. The budget was based on an average projected oil price of $65 per barrel, which was lower than the actual price for most months of 2023. The realized fiscal surplus ranged between 1-2% of GDP, due to improved oil revenues and spending rationalization, compared to a slight deficit in the previous year.

The budget relies primarily on oil and gas revenues, which account for approximately 60-70% of total public income. The budget benefited from increased oil exports, averaging 7.5 million barrels per day and export values exceeding SAR 600 billion. Non-oil revenues also grew, supported by the application of a 15% value-added tax (VAT), collection of government service fees, and increased indirect tax revenues. Government investments and profits from state-owned companies, such as Aramco, also contributed to revenue growth.

Data from the Ministry of Finance indicates that public expenditures in the 2023 budget were distributed across several main items: about 25% for salaries and wages, 15% for government support (fuel, electricity, housing), 15% for defense and security, 20% for development projects (infrastructure, health, education), with the remainder for general operating expenses. There was a noticeable increase in focus on the housing and infrastructure sectors compared to previous years, to keep pace with population growth and improve quality of life. Allocations for future sectors aligned with Vision 2030 were also enhanced.

Saudi Arabia ended 2023 with a primary fiscal surplus of 1-2% of GDP, supported by higher oil prices and growing non-oil revenues. This surplus followed years of minor deficits and reflects the flexibility of fiscal management and the government's ability to control spending and adapt policies to global changes. The surplus strengthened international reserves, which exceeded SAR 2 trillion, providing the Saudi economy with greater stability and boosting confidence among both local and international investors.

According to IMF estimates, Saudi Arabia's real GDP grew by about 8.5% in 2023, surpassing the budget's announced target of 6%. This growth was driven by increased oil production and exports, stable domestic economic activity, and higher spending on development sectors. The budget helped finance major projects under Vision 2030, enhancing national economic competitiveness and attracting foreign investment.

The Saudi riyal exchange rate remained stable against the US dollar at 3.75 riyals per dollar, providing significant budgetary stability, especially regarding foreign currency debt. The Kingdom’s international reserves reached approximately $560 billion by the end of 2023, equivalent to over SAR 2 trillion. This high level of reserves enabled Saudi Arabia to finance deficits when needed, reduce reliance on external borrowing, and strengthen its international credit rating.

The 2023 budget directly impacted the oil and energy, industrial, infrastructure, advanced technology, and financial sectors. Significant support was allocated to renewable energy projects and the expansion of the petrochemicals sector, as well as the establishment of logistics centers and the development of transport networks and airports. The budget also supported the financial and banking sector by increasing deposits and liquidity, enabling Saudi banks to strengthen their lending capacity. Contracting and industrial companies benefited from government spending on major projects, while Saudi financial markets saw improved performance and indicators, driven by investor confidence in fiscal stability.

Regionally, Saudi Arabia competes strongly with the UAE, Qatar, and Kuwait in budget management and reliance on oil revenues. While some competing countries focus on tourism or emerging technologies, Saudi Arabia invests heavily in mega-projects such as NEOM and the Red Sea Project, and focuses on attracting industrial and technological investments. The Kingdom's large reserves give it a competitive edge in sustaining project financing compared to countries that may resort to borrowing or quickly deplete their reserves. Saudi Arabia also seeks to attract skilled labor and global companies through attractive investment and legislative incentives.

The 2023 budget allocated substantial funds to major projects under Vision 2030, such as NEOM, the Red Sea Project, and the development of industrial and renewable energy sectors. These projects aim to diversify income sources, increase local employment, and localize technology and industry. Government funding for these projects is fundamental to achieving strategic goals, attracting foreign investment, and ensuring sustainable long-term economic growth.

With a surplus achieved in the 2023 budget, the Saudi government activated programs for issuing domestic and international sukuk and bonds to diversify funding sources and reduce reliance on oil. In 2024, international bonds worth over $6 billion were issued, boosting global investor confidence in the Saudi economy and leading to improved credit ratings from agencies such as Moody’s and S&P. The development of the local debt market also helped reduce exchange rate volatility risks and provided sustainable financing for government projects.

The Saudi government continued to implement reform policies, including extending the 15% VAT rate through 2027 and expanding the scope of indirect taxes. These policies enhanced non-oil revenues, achieved fiscal sustainability, and reduced dependence on oil income alone. The tax amendments also positively affected the country’s credit rating and were considered supportive factors for confidence in the Kingdom’s financial capacity.

Although the general budget is not a listed company, its results significantly impact the Saudi stock market (Tadawul). The balanced budget and fiscal surplus boosted investor confidence and led to a market index rise of about 7% in 2024. Contracting, industrial, and banking companies benefited from large-scale government spending, while initiatives from the Public Investment Fund stimulated the market and injected liquidity into national companies. The financial stability resulting from sound budget management remains a key factor in attracting local and foreign investments.

Despite achieving a fiscal surplus, the Saudi budget remains exposed to the risks of global oil price volatility, which can directly impact revenues. Government spending patterns also require continuous control, especially amid global challenges such as inflation and rising commodity prices. The relative reliance on non-oil revenues presents an additional challenge if non-oil sectors slow down. Furthermore, public debt management requires caution to prevent future debt levels from rising. These challenges highlight the importance of fiscal flexibility and updating policies in line with local and global economic changes.

2023 and subsequent developments in 2024 and 2025 saw several important steps, including the issuance of international sukuk and bonds, credit rating improvements, the launch of major national projects, and the development of the local debt market. Financial reports for Q4 2023 also showed economic stability and progress toward budget objectives. The government remains prepared to review the 2024 budget if needed, especially if oil prices change or unexpected global economic developments occur. The Kingdom remains committed to enhancing fiscal sustainability and supporting the national economy through balanced and precise financial policies.