The Saudi budget is one of the most significant economic indicators closely monitored by both local and international investment communities. It encapsulates the government's spending directions and expected revenues, guiding economic and social policies for the entire year. In the first 100 words of this article, we highlight the importance of the Saudi budget, which is closely linked to macroeconomic variables, directly affecting liquidity levels, developmental project spending, the private sector, and the Saudi stock market. The budgets for 2024 and 2025 reflect a continued expansionary spending approach, supported by initiatives from Vision 2030, with an increasing focus on diversifying income sources and reducing dependence on oil. This article will detail the budget structure, revenue sources, spending items, deficits, and financing methods, along with their impacts on sectors and listed companies such as Hail Cement Company (3001), while also reviewing the latest developments and challenges. We will provide an unbiased analytical perspective supported by numbers and official data, maintaining standards of neutrality and financial education, without offering any investment recommendations. In conclusion, we will emphasize the importance of consulting a licensed financial advisor before making any investment decisions.
What is the Saudi Budget?: Concept and Economic Role
The Saudi budget represents the annual financial plan announced by the government to clarify the expected revenues and expenditures, forming the fundamental framework that defines government spending areas and income sources. Historically, the Saudi budget has been closely tied to oil revenues; however, recent years have seen profound shifts in the budget structure, incorporating the goals of Vision 2030, which aims to diversify the economy and reduce reliance on oil revenues.
The budget is typically announced at the end of each year, accompanied by a preliminary statement outlining general estimates for the upcoming year. This budget plays a pivotal role in shaping macroeconomic policies, determining spending priorities on developmental projects (infrastructure, health, education, social services), and influencing liquidity levels within the market, as well as trends in both the public and private sectors. Additionally, the budget serves as a reference for investors and analysts to assess the government's ability to support the national economy and measure the sustainability of economic growth.
The structure of the Saudi budget reflects the state's direction towards achieving a balance between financial stability and growth stimulation, applying best practices in managing public debt and current accounts. Thus, the budget emerges as a key tool for regulating fiscal policy and directing resources towards priority sectors, achieving comprehensive and sustainable development.
Revenue Sources in the Saudi Budget
The revenue structure in the Saudi budget is based on a mix of oil and non-oil resources. Traditionally, oil and gas revenues accounted for between 60% to 70% of total revenues, derived from crude oil sales and its products, as well as natural gas to global markets. However, recent years have witnessed significant growth in non-oil revenues, as part of the economic transformation strategy under Vision 2030.
Non-oil revenues include a value-added tax currently set at 15%, in addition to customs duties, government licensing fees, taxes on foreign corporate profits, and administrative fees. Government investment profits from institutions such as the Public Investment Fund also contribute to revenue enhancement, alongside white land fees and some other sector-specific fees.
Diversifying revenue sources aims to reduce dependence on oil and achieve greater flexibility in facing global energy price fluctuations. These efforts reflect the government's commitment to improving the efficiency of the financial system and achieving economic sustainability while maintaining revenue stability in the face of international changes.
Main Spending Items in the Saudi Budget
The Saudi budget allocates government spending across several main items that serve sustainable development goals and improve the quality of life for citizens and residents. The most important of these items include:
1. Capital expenditure on infrastructure: This includes projects for roads, bridges, airports, railways, power stations, schools, hospitals, housing projects, and other mega-projects that support national economic growth.
2. Operational expenses: These relate to salaries and wages of government employees, costs of operating government facilities, and administrative expenses.
3. Social spending: This covers support for health and education programs, social services, and the social security fund.
4. Energy and essential goods support: A portion of the budget is allocated to support energy prices and some essential goods to maintain social stability.
5. Security and defense: This is one of the largest spending items, meeting the needs of the military and security sectors and maintaining internal stability.
The distribution of these items reflects a balance between the need for investment in infrastructure and economic transformation while maintaining the state's commitments to society and vital sectors.
Saudi Budget Figures 2024-2025: Financial Analysis
According to the preliminary statement from the Ministry of Finance, the estimated Saudi budget for 2024 includes expenditures of 1,251 billion riyals, against expected revenues of approximately 1,172 billion riyals. The budget is expected to record a slight financial deficit of around 1.9% of GDP, equivalent to approximately 80 billion riyals. For 2025, expenditures are estimated at around 1,285 billion riyals and revenues at approximately 1,184 billion riyals, with a projected deficit of about 2.3% of GDP, equivalent to approximately 100 billion riyals.
These figures reflect a gradual increase in government spending driven by the desire to accelerate the implementation of strategic projects under Vision 2030, while maintaining relatively limited deficit levels. The expenditure-to-GDP ratio is close to 30%, and revenues around 28%, indicating a relative balance and a sound fiscal policy compared to recent Saudi economic growth rates.
The data also reflects the government's flexibility in dealing with fluctuations in oil prices and its ability to maintain financial sustainability through diversifying revenue sources and controlling current spending.
Budget Deficit and Financing Methods
The budget deficit in the Saudi budget represents the difference between total spending and actual revenues during the fiscal year. In 2024 and 2025, the expected deficit ranges between 1.9% and 2.3% of GDP, which are considered moderate ratios compared to the size of the Saudi economy.
To finance this deficit, the state relies on a mix of issuing bonds and government sukuk in local and international markets, along with balanced management of domestic and external borrowing. The government adheres to an annual borrowing plan that allows it to cover the deficit without significantly impacting the stability of public debt or the cost of financing.
Financial policymakers emphasize the importance of maintaining safe debt levels while monitoring debt service costs and ensuring long-term repayment sustainability. Sovereign reserves play a supportive role in managing risks and providing additional liquidity if necessary. These policies come within a general approach to ensure macroeconomic stability and stimulate growth without placing unsustainable burdens on public finances.
Impact of the Saudi Budget on the Financial Market and Stocks
The Saudi budget plays a pivotal role in guiding investor expectations in the Saudi financial market (Tadawul), as government spending levels and project priorities affect the performance of listed sectors, particularly those linked to infrastructure, real estate development, and energy.
Increased government spending often translates to higher demand for products from companies operating in construction, cement, contracting, services, and energy sectors, which reflects positively on their financial results and growth forecasts. Conversely, a high deficit may necessitate raising interest rates or curtailing spending, which could pressure market liquidity and affect stock valuations.
For instance, companies like Hail Cement Company (3001) benefit from substantial budget allocations for infrastructure projects, as demand for their products rises during periods of government expansion. Additionally, budget stability enhances investor confidence in the market and attracts both foreign and domestic investments.
However, investors must assess the budget's impact within a broader context that includes global economic conditions, oil prices, and developments in fiscal and monetary policies.
Economic Sectors Affected by the Saudi Budget
Government spending items in the Saudi budget directly impact many economic sectors, providing renewed growth and expansion opportunities in the local market. The most affected sectors include:
1. Construction and infrastructure sector: This sector experiences significant growth with increased government spending on roads, bridges, housing, and public facilities. Cement companies like Hail Cement Company (3001) benefit from high demand for their products.
2. Energy, oil, and petrochemical sector: This sector heavily relies on government support policies and oil price fluctuations, as the budget affects the size of investments and expansions in this sector.
3. Health and education sector: Increased allocations to these sectors mean better infrastructure development, new job opportunities, and improved quality of services provided to citizens.
4. Tourism and entertainment sector: Under Vision 2030, the budget stimulates tourism and entertainment projects, providing opportunities for hotel, entertainment, and logistics companies.
5. Technology and services sector: Digital transformation and continuous improvement of government services increase demand for companies operating in information technology and communications.
The distribution of spending across these sectors reflects the state's strategy in building a diverse and sustainable economy.
Vision 2030 and the Saudi Budget: Relationship and Impact
Vision 2030 is the strategic framework guiding the Saudi budget towards achieving economic and social transformation goals. Through the budget, the government translates the vision's objectives into practical programs, such as increasing investment in non-oil sectors, supporting innovation, developing infrastructure, and expanding the national economy's base.
The budget allocates substantial amounts for national transformation initiatives, such as NEOM projects, the Red Sea, and renewable energy, alongside health and education development programs. The state aims to achieve a balance between long-term investment spending and controlling the budget deficit through flexible financial policies and effective public debt management.
This close relationship between the budget and Vision 2030 enhances sustainable growth opportunities and supports building a diverse economy capable of facing future challenges while reducing the impact of global oil price fluctuations.
Recent Developments in Tax Policies and Fees in the Budget
In recent years, there has been relative stability in tax policies and fees within the Saudi budget, following the increase of the value-added tax to 15% in 2020. No significant new taxes have been introduced in the 2024 or 2025 budgets, nor have there been radical changes to taxes imposed on local companies or citizens.
The government relies on customs duties for several luxury goods and administrative fees as part of non-oil revenues. A periodic assessment of these fees is conducted to achieve a balance between supporting revenues and encouraging local economic activity.
The government reaffirms its commitment to maintaining a stable business environment and encouraging investment while continuing structural reforms aimed at improving spending efficiency and diversifying income sources without imposing significant additional burdens on citizens or the private sector at this time.
Saudi Budget and the Labor Market: Opportunities and Challenges
The Saudi budget directly impacts the local labor market, creating new job opportunities through large government projects, particularly in construction, health, education, and technology sectors. Increased spending on infrastructure and social services means a need for qualified personnel in engineering, management, medical services, and education fields.
Conversely, a budget deficit may lead to spending cuts or delays in some projects, potentially affecting job creation rates in certain sectors. Nevertheless, government policies remain supportive of the labor market through training and qualification programs, encouraging the private sector to hire within localization objectives.
Overall, a balanced and development-oriented budget contributes to enhancing labor market growth and supporting long-term economic and social stability.
Role of Government Liquidity and Financing in Financial Stability
Government liquidity plays a central role in achieving financial stability for the Saudi economy. Through the budget, the state determines the expected liquidity to be injected into the market through spending on various projects, impacting overall demand levels and economic growth.
In the presence of a budget deficit, the government resorts to various financing tools, such as issuing bonds and sukuk or using part of the sovereign reserves. Managing this financing requires a delicate balance between meeting investment needs and maintaining public debt stability and financing costs.
The government seeks to ensure sufficient liquidity to support strategic projects while avoiding excessive debt or negatively impacting interest rates. This approach is one of the foundations of fiscal policy aimed at achieving sustainable growth and long-term economic stability.
Recent Key Developments in the Saudi Budget
The year 2024 witnessed several important developments in fiscal policy and budget management in Saudi Arabia. The Ministry of Finance announced a preliminary budget statement, confirming the continuation of the expansionary spending approach on strategic projects while focusing on achieving financial and social efficiency.
The government reaffirmed the continuation of the annual borrowing plan to finance the deficit while maintaining stable public debt levels and seeking diverse financing opportunities that align with market conditions. Additionally, value-added taxes and customs duties were maintained at their levels, without significant amendments to tax policies.
In terms of reforms, procedures for foreign investment have been facilitated, and ownership ratios for foreigners in certain sectors have been raised, reflecting the state's desire to attract new capital and enhance the competitiveness of the national economy. The government continues to manage sovereign reserves efficiently to enhance the Kingdom's ability to face any potential external shocks.
All these developments confirm the Kingdom's commitment to a path of financial reform and economic transformation while ensuring transparency and clarifying fiscal policies to investors and markets.
Case Study: Impact of the Budget on Hail Cement Company (3001)
Hail Cement Company (3001) serves as a practical example of how listed companies in the Saudi stock market are affected by the state's financial policies. With increased government spending on infrastructure and housing projects, demand for construction materials and cement rises, positively impacting the results of companies operating in this sector.
According to the announced budget for 2024 and 2025, strong demand for products from companies like Hail Cement is expected to continue due to the expansion of road, bridge, and housing projects under Vision 2030. This leads to improved operating rates and sales, increasing growth opportunities in the medium term.
However, it should be noted that the company's performance is also influenced by other factors such as market competition, raw material costs, and energy price developments. Therefore, analyzing the budget's impact remains part of a comprehensive assessment that includes all economic and sectoral variables.
Financial Sustainability and Future Challenges
Saudi Arabia aims to achieve financial sustainability in the medium and long term through flexible fiscal policies, diversifying income sources, and improving spending efficiency. Among the key challenges facing the budget are:
1. Oil price fluctuations: Despite progress in non-oil revenues, the Saudi economy remains vulnerable to oil revenue volatility.
2. Maintaining safe debt levels: With a persistent deficit, it is essential to control borrowing levels and costs.
3. Continuing to finance major projects: Implementing Vision 2030 projects requires sustained investment spending without affecting financial stability.
4. Responding to global changes: Geopolitical and economic events impact oil demand and investments.
Addressing these challenges relies on prudent management of fiscal policies, developing innovative financing tools, and increasing the flexibility of the national economy to withstand shocks.
Conclusion
In conclusion, the Saudi budget represents a fundamental pillar in achieving financial stability and enhancing national economic growth, linking the objectives of economic transformation under Vision 2030 with the needs of society and vital sectors. The budget reflects a balanced approach between improving spending efficiency and enhancing strategic investments while maintaining acceptable levels of deficit and debt. Our analysis indicates that sectors related to infrastructure, energy, health, and education are the most benefited from expansionary fiscal policies, while challenges related to oil price volatility and deficit management remain.
It is always important when studying the budget's impact on the market or companies, such as Hail Cement Company (3001), to consider the bigger picture and evaluate all factors related to the local and global economy. The SIGMIX platform allows you to follow the latest data and analyses regarding the Saudi financial market, but the investment decision remains an individual responsibility that requires consulting a licensed financial advisor before any investment step to ensure the best decision according to your goals and needs.
Frequently Asked Questions
The Saudi budget for 2024 includes expenditures of 1,251 billion riyals against expected revenues of approximately 1,172 billion riyals, with a limited financial deficit of 1.9% of GDP. The budget focuses on increasing spending on mega-projects and infrastructure, alongside supporting vital sectors such as health and education, and enhancing non-oil revenues through taxes and fees. The budget aims to achieve a balance between economic growth and financial sustainability, supporting the objectives of Vision 2030.
The Saudi budget relies on two main sources of revenue: oil revenues, which often account for more than 60% of total income through oil and gas exports, and non-oil revenues that include value-added tax, customs duties, administrative fees, and profits from government investments. The state is working to increase the share of non-oil revenues to reduce dependence on oil and enhance financial sustainability.
The main spending items in the Saudi budget include capital expenditure on infrastructure projects, operational expenses such as salaries and wages, social spending on health, education, and social support, and support for energy and essential goods. The budget also allocates a significant portion to the security and defense sector, reflecting the government's direction towards achieving comprehensive development and improving the quality of life for citizens.
When there is a deficit in the budget, the Saudi government resorts to financing it through issuing bonds and government sukuk in local and global markets, in addition to balanced domestic and external borrowing. A portion of sovereign reserves may also be used when necessary. These policies aim to maintain safe debt levels and low financing costs while ensuring the continuity of strategic project implementation.
The Saudi budget is significantly affected by oil price fluctuations, as oil is the main source of revenue. Rising prices lead to increased revenues and reduced deficits, while declines may raise the deficit size and require more borrowing. To address this, the government is working to diversify income sources and increase non-oil revenues to ensure budget stability in the face of global market fluctuations.
The Saudi budget is the financial tool for implementing the plans and programs of Vision 2030, allocating substantial resources for economic transformation and sustainable development projects. The budget focuses on diversifying the economy, supporting non-oil sectors, and improving public services, achieving the vision's goals of building a prosperous economy, a vibrant society, and an ambitious nation.
The Saudi budget for 2024 and 2025 has not seen significant changes in taxes and fees, as the value-added tax remains at 15%, and customs and administrative fees continue without substantial amendments. The government aims to maintain a stable business environment and encourage investment while continuing structural reforms to improve spending efficiency and diversify revenue sources.
The expansionary budget leads to the creation of new job opportunities, especially in construction, health, education, and technology sectors, due to increased spending on government projects. The budget also supports training and qualification programs and encourages the private sector to hire within localization objectives. This approach positively contributes to enhancing economic and social stability and reducing unemployment rates.
The budget directly impacts the performance of listed sectors in the market, especially those related to infrastructure and energy. Increased government spending boosts demand for products from companies like cement and contracting firms, positively reflecting on their financial results. Additionally, budget stability enhances investor confidence in the market and attracts both local and foreign investments.
The main challenges include oil price fluctuations, maintaining safe debt levels, financing mega-projects, and responding to global economic changes. The Kingdom addresses these challenges by diversifying income sources, improving spending efficiency, and developing financing tools to ensure financial sustainability and long-term economic growth.