Budget: A Comprehensive Understanding of Its Role and Importance in the Saudi

The budget is an estimated financial document prepared for a specific time period, often annually, to determine expected revenues and planned expenditures for the state or company. In the Saudi context, the term budget primarily refers to the state’s general budget, which reflects the government's priorities in managing and allocating resources across key sectors such as infrastructure, health, education, and defense. The budget is also used in the business sector as a financial plan that guides companies in estimating their cash flows, production costs, operating expenses, and profit distribution and capital investment strategies.

The state’s general budget is a key tool in directing financial and monetary policies, contributing to economic stability and stimulating growth by determining allocations for major projects and supporting vital sectors. For companies, the internal budget helps achieve profitability and financial sustainability goals. In economic media, the budget is often referred to as the clearest indicator of the economy's health and future trends, as it determines the size of government spending, resource distribution, and revenue forecasts, all of which directly or indirectly reflect on the performance of the financial market and various investment sectors.

It is essential to distinguish between the state’s general budget and the internal budget of companies. The general budget represents a comprehensive financial plan at the state level, prepared by the Ministry of Finance in collaboration with other government entities, encompassing all government revenues (such as oil, taxes, fees) and all expenditures (operational and capital). It aims to achieve financial balance and sustainability and is subject to approval by legislative bodies.

On the other hand, a company's internal budget is a document that outlines the company’s financial expectations over a specified period, including revenue estimates from sales, operating expenses, production costs, and investment plans. This budget assists in making strategic decisions, such as expansion or contraction of activities, profit distribution, or capital increase.

In the Saudi financial market, the general budget is viewed as a key indicator that can determine sector trends, as an increase in government spending on infrastructure projects, for example, may mean increased demand for building materials, which reflects positively on the performance of cement companies like Hail Cement (3001). Conversely, companies that rely primarily on the internal budget need to monitor developments in the general budget to adjust their operational and investment plans.

The process of preparing the general budget in Saudi Arabia begins with estimating expected revenues for the upcoming fiscal year, with a particular focus on global oil prices as the primary source of revenue, alongside non-oil revenues such as taxes and government fees. Government spending priorities are then determined, depending on the country’s strategic objectives, such as supporting development projects, improving public services, and enhancing infrastructure.

The steps in preparing the budget include gathering spending proposals from government entities, evaluating programs and projects, studying macroeconomic forecasts, and then preparing a preliminary version of the budget that is presented to the Economic and Development Affairs Council. After reviewing and discussing the preliminary budget, it is amended and approved by the Council of Ministers, and then officially announced to the public.

The government places special importance on managing the budget deficit or surplus, working to keep the deficit ratio within acceptable levels by controlling spending and increasing non-oil revenues, in addition to managing public debt when necessary. This organized process contributes to enhancing transparency and achieving efficiency in resource allocation, supporting economic stability and boosting investor confidence in the financial market.

The Saudi budget for the years 2024 and 2025 has witnessed notable developments reflecting the government’s strategic directions in supporting economic growth and diversifying income sources. The expected spending in the 2024 budget has exceeded one trillion Saudi Riyals, with a significant increase in allocations for major development projects such as housing, infrastructure, renewable energy, and industrial projects.

The government announced conservative price forecasts for oil barrels (80–85 USD) to secure financial planning, while focusing on enhancing non-oil revenues through tax system development and stimulating the private sector. In the 2025 budget, public expenditures were expanded to support Vision 2030, with substantial amounts allocated for housing and industrial city projects, thereby boosting demand in sectors such as cement and construction.

Reports indicate that the national economy is growing at accelerated rates supported by government investments and increased foreign currency reserves, strengthening the ability to finance major projects. Official data also indicated that the 2025 budget would support the continued implementation of strategic projects, contributing to raising investor confidence in the Saudi market and supporting the performance of listed companies.

The general budget plays a pivotal role in determining trends in the Saudi financial market, as it directly affects the performance of various sectors through government spending allocations. An expansionary budget, which includes increased spending on infrastructure, housing, and industry projects, creates significant investment opportunities for companies operating in these areas.

Investors and financial analysts closely monitor budget figures and their sectoral distributions, as an increase in allocations for a particular sector often means increased demand for products and services from companies within that sector. For example, the budget supports housing and road projects, leading to increased demand for cement, which positively reflects on companies like Hail Cement (3001).

On the other hand, the budget affects liquidity in the financial market, as government spending boosts economic activity and encourages consumption and investment. Additionally, tax or structural reforms included in the budget may impact companies' costs and profits, which may reflect on stock prices. For this reason, the budget is considered a major economic event that largely determines stock market trends in the Kingdom.

The general budget represents the main financial tool for implementing Saudi Vision 2030, which aims to diversify national income sources and reduce dependence on oil by supporting strategic projects in tourism, entertainment, technology, and industry. The Saudi government allocates substantial financial resources through the budget to fund initiatives related to the vision, such as NEOM, the Red Sea Project, Qiddiya, and port expansions.

The budget reflects a trend towards increasing spending on non-oil sectors, allowing for the creation of new job opportunities, enhancing innovation, and supporting entrepreneurship. The budget also contributes to developing the necessary infrastructure to attract foreign and local investments, leading to a more diversified and sustainable national economy.

Practically, the budget is the main gateway to achieving the goals of Vision 2030, ensuring sustainable financing for major projects and supporting the transformation of strategic plans into tangible reality. This, in turn, positively reflects on the investment climate in the Kingdom and enhances the attractiveness of the Saudi financial market for both local and international investors.

The balance sheet is one of the most important financial statements for any company listed in the financial market, reflecting the company’s financial position at a specific point in time. The balance sheet consists of three main elements: assets (what the company owns), liabilities (what it owes), and equity (what belongs to shareholders after deducting liabilities).

Financial analysts use the balance sheet to assess the company’s financial strength, its ability to meet short- and long-term obligations, and its efficiency in managing its assets and resources. This statement also helps in calculating important ratios such as the price-to-earnings (P/E) ratio, dividend yield, and liquidity and solvency ratios.

For companies like Hail Cement (3001), the balance sheet shows the company's strength in fixed assets (factories, equipment) and a low level of debt, positively reflecting on its financial stability and ability to withstand economic fluctuations. The balance sheet also enables investors to compare the company's performance with its competitors in the same sector and make informed decisions based on clear and transparent data.

The cement sector is a vital sector in the Saudi economy, providing essential materials for construction projects, which represent a significant portion of government spending allocated in the general budget. The sector witnesses strong competition among several listed companies, such as Hail Cement (3001), Yamama Cement, Northern Cement, and Al-Jouf Cement.

The performance of cement companies is closely linked to the allocations of the general budget, as increased spending on housing and infrastructure projects leads to higher demand for cement. Conversely, companies may face challenges such as rising energy costs and price competition, which affect profit margins.

Reports indicate that the budgets for 2024 and 2025 focused on supporting housing and industrial city projects, positively reflecting on the cement sector. Additionally, the trend towards exporting surplus to neighboring markets opens new opportunities for Saudi companies. However, the sector remains exposed to economic cycles that affect demand and prices, requiring companies to develop flexible strategies to face challenges and capitalize on opportunities.

Hail Cement Company (trading symbol 3001) is one of the leading companies in the Saudi cement sector. Established in 1976, its headquarters is located in the Hail region, serving the local market and some regional markets. The company produces various types of cement and is characterized by strong physical assets and advanced infrastructure.

Hail Cement's stock has experienced price fluctuations between 35 and 45 Saudi Riyals during 2024-2025, with a price-to-earnings (P/E) ratio ranging between 12 and 15 times, indicating the company's stability compared to the rest of the sector. Cash distributions have recorded rates ranging between 20% and 40% of net profits, with an annual yield rate of 4–6%, enhancing the stock's attractiveness for income-seeking investors.

The company's balance sheet shows strong solvency and positive cash flows due to effective cost management and improved local and export sales. The company's report for the fourth quarter of 2025 indicated an improvement in net profit and revenue growth of 10–15% compared to the previous year, reflecting the company's success in benefiting from public budget projects and supporting local demand.

The Saudi budget directly impacts the cement sector through allocations for housing and infrastructure projects, which represent the largest share of government spending. With the approval of the 2025 budget and increased allocations for development projects, demand for cement has risen, leading to growth in sales for sector companies, particularly Hail Cement (3001).

Hail Cement's stock benefits from the budget expansion through increased local demand and improved profit margins due to better cost management. Additionally, continued government spending opens opportunities for the company to expand production lines and increase exports, especially with a 5–10% growth in exports to neighboring markets by late 2025.

However, the company remains exposed to other factors such as price competition, fluctuations in energy prices, and regulatory changes in the sector. Investors closely monitor budget movements to estimate their impact on the profits and future of cement companies, ensuring they review periodic disclosures and financial reports published on official market platforms.

Despite the significant benefits that an expansionary budget brings to listed companies in the Saudi financial market, there are several risks and challenges to consider. First, the budget relies heavily on oil revenues, making it susceptible to fluctuations in global prices. If oil prices drop sharply, government spending allocations may decrease, affecting demand levels in sectors such as construction and cement.

Second, companies face internal challenges such as rising raw material and energy costs, which may pressure profit margins even with increased demand. Third, intense competition among local companies drives some to lower prices, potentially reducing the overall profitability of the sector. Fourth, legislative and environmental changes impose additional investment requirements, especially in industrial sectors. Finally, the financial market may be affected by regional and global economic developments, such as geopolitical crises or global economic slowdowns.

Thus, successful companies are those that have flexible risk management plans and can capitalize on the opportunities provided by the general budget while maintaining sustainable growth and profitability.

Monitoring the general budget and the performance of listed companies in the Saudi financial market requires the use of official and reliable sources. Information related to the budget can be obtained from the Saudi Ministry of Finance’s website, in addition to periodic reports issued by government agencies and economic institutions. The Saudi financial market platform (Tadawul) also provides financial disclosure reports, quarterly and annual results, and news about listed companies such as Hail Cement (3001).

Local economic media, such as Al-Middle East newspaper and Argaam website, offer comprehensive analyses of sector and company performance, showcasing the budget's impacts on the market. Brokerage firms' reports can also be utilized for periodic evaluations and analyses. It is advisable to rely on these official channels to obtain an accurate and comprehensive picture of financial and economic developments, while always consulting a licensed financial advisor before making any investment decisions.