Riyadh, Launching of the Fiscal Sustainability Program (formerly the Fiscal Balance Program) in June, 2017 formed a main turning point to empower the fiscal planning process at the medium-term with the aim of sustaining and ensuring the stability of the general finance with maintaining economic growth rates through: diversifying revenue sources for the state, increasing the efficiency of the public expenditure, stimulating the private sector and providing subsidy to needy citizens.
Upon revising the program, it has been restructured to be sustainable and supporter for the economic growth through medium-term fiscal planning, applying fiscal policies, redirecting expenditure to avoid developments in the actual prices of oil, enhance the ability to deal with crises, focus on investments that can realize a strong sustainable growth that is independent from oil markets.
Since its inception, the program has contributed to controlling the deficit ratios of GDP from 15.8% in 2015 to 4.5% in 2019, which led to strengthening the Kingdom of Saudi Arabia’s financial position and enhancing its financial center in dealing with external shocks despite all difficult circumstance that the world witnessed in 2020 due to the outbreak of the novel coronavirus (COVID-19) pandemic.
Executing the program led to increasing the level of financial planning and boosting the quality of budget implementation, where average annual variance of the actual performance of total expenditures decreased from its budget estimates from an average of 16% during the period (2014-2016) to an average of 4% during program implementation, from 2017 to 2019.
The program has also succeeded in developing a tax system known for efficiency and effectiveness, especially that it targets diversifying and developing revenues in a structural and continuous way as a main and sustainable source, mainly for non-oil revenues, where the remarkable growth in non-oil revenues has helped reduce financial risks resulting from fluctuations in the international oil markets.
Among achievements that the program has realized in this framework is the automation and development of procedures and systems and the increase of Zakat and tax statements at the General Authority of Zakat and Tax to more than 1.9 statements in the same year, marking an increase rate of more than 700% and an increase of commitment to presenting Zakat and tax statements to 95% in 2020, in addition to launching the Zakaty portal and application allocated for Zakat for individuals, where participants exceeded 60,000 and 156 million paid Zakat were received up until 2020.
The program also contributed to reforming some economic distortions and encouraged the ideal utilization of economic resources, such as gradual connection of energy prices until reaching a reference rate, enhancing job opportunities for citizens through applying the financial equivalent for migrant workers.
Through the National Debt Management Center, the program’s achievements continued, where the increase in the trade volume in the local secondary market totaled more than 70 billion Saudi riyals from deals implemented in 2020, compared with 10 billion Saudi riyals in 2019, marking a 600% increase rate on an annual base. Also, 2020 witnessed an increase in the international investment base with 12.4%, where the first international bonds were issued with a negative return outside the European Union in 2021 and the second biggest bonds outside the European Union.
While the program is still implementing several economic reforms, it also takes into consideration burdens shouldered by citizens through redirecting support to beneficiaries through citizens’ accounts, as well as offering support and stimulus packages to the private sector to help it alleviate the impacts of these reforms.
The program also adopts a set of initiatives that contribute to increasing transparency and boosting the efficiency of administrating the public finance, such as: developing the framework and management of the macro-financial policies, improving the efficiency of the public expenditure, launching the Etimad platform to enhance competitiveness, oversight and performance measurement, where the Kingdom of Saudi Arabia’s classification developed 18 ranks in the budget transparency index in 2019, compared with one point in the previous survey that was issued in 2017.
Since the announcement of the Saudi Vision 2030 in April, 2016, the Kingdom of Saudi Arabia has been witnessing comprehensive economic, social and structural activities to provide the proper environment to realize the vision, where 13 programs have been accredited to realize the vision, including the Fiscal Sustainability Program (formerly the Fiscal Balance Program) that draws a comprehensive fiscal and economic framework for the medium-term with the aim of realizing economic growth and fiscal sustainability through going on with economic reforms and financial procedures at the levels of expenditure and revenues and continuing the implementation of initiatives of the program.
Initial estimations for 2021 expect the real GDP to grow by 3.2%, driven by the assumption of going on with the recovery of economic activities throughout the year, where the government will continue its efforts to enhance the role of the private sector to be a main driver for the economic growth, support the growth of small- and medium-sized enterprises (SMEs) in synchronization with the government’s endeavors to implement structural reforms that aim at diversifying the economy through the Saudi Vision 2030, improve the business environment and provide new opportunities for local and foreign investors, in addition to the envisioned positive role of the expenditure of development funds and the implementation of major projects, privatization programs and other programs aimed at realizing the vision.
Source: Saudi Press Agency