Saudi Arabia’s state budget deficit shrank nearly 10 per cent from a year earlier in the third quarter of 2017, keeping the government on track to meet its full-year target for strengthening its finances, official data showed on Sunday.
Revenue climbed 11 per cent to SAR142.1bn ($37.9bn) in the quarter while spending increased 5 per cent to SAR190.9bn. That left a deficit of SAR48.7bn, down about 9.5 per cent from a year ago.
The government is working to eliminate a deficit caused by low oil prices, and until the gap can be closed, Riyadh is being forced to borrow heavily and draw down its foreign reserves.
For the first nine months of this year, the deficit totalled SAR121.5bn, down 40 per cent year-on-year. That suggests the government is likely to achieve its target of a SAR198bn deficit this year, down from last year’s actual deficit of SAR297bn.
Non-oil revenue jumped 80 per cent year-on-year to SAR47.8bn in the third quarter. The finance ministry said this showed Riyadh’s economic reforms, which aim to cut its reliance on oil income, were feasible; among other steps, the government imposed a tax on tobacco and sugary drinks in June.
But the success in cutting the deficit has come at a high cost to the economy. Austerity measures pushed the economy into recession in the second quarter of 2017, and have deterred the private investment which the government needs to develop non-oil industries.
As a result, sources briefed by finance ministry officials told Reuters early this month that the government planned to push back the target date for eliminating the deficit entirely to 2023 from 2020.
The introduction of a 5 per cent value-added tax is to go ahead on schedule in January but some other revenue-raising steps, such as domestic fuel price rises, are being delayed.