Fiscal Policy In Saudi

Andreas Cantu 

In 2017, Saudi Arabia was in discussion over two new fiscal policies. 

1. the first would look to decrease the overall government spending in an attempt to lower their fiscal deficit to 7.7% of GDP in 2017 from the 11.7% in 2016. 

2. The second policy would go hand-in-hand with the first as they looked to better allocate the remaining government spending. 

However, government spending is one of the key drivers of all economic activity in Saudi Arabia, so the contraction of their spending in certain major sectors (oil) will require more advocation of the private sector in order for the economy to not completely fail after the decrease in spending. The decrease will also result in an increase in taxation and fees, as well as newer sources of capital as the private sector increases. 

The largest stakeholders and advocate for both these policies would be the country of Saudi Arabia itself. As the world slowly moves from oil and with oil accounting for nearly 90% of Saudi Arabia's economy, it is time that they begin looking for more ways to bring money into the country instead of relying on fossil fuels. However, there is some backlash towards these policies from the workers at the fossil-fuel factories/refineries. If this plan works, they could slowly start to see layoffs as Saudi Arabia will start slowly moving away from that sector which could cause other economic problems down the road. 

As this graph shows, Saudi Arabia's government debt is expected to increase this year. With the fall of oil prices and the COVID-19 pandemic still at large, their government debt continues to rise as they try to offset the global economic changes with more government spending. This government spending is a major factor in this debt, furthermore, the Saudi government needs these policies to work so that they can begin decreasing their debt. 

Al-Aloosy, Massaab, et al. “Reformers Are Holding Ground: Saudi ARABIA'S New Fiscal Policy.” Arab Gulf States Institute in Washington, 12 Sept. 2018, agsiw.org/reformers-holding-ground-saudi-arabias-new-fiscal-policy/.

“Saudi Arabia’s Economic Crisis, Explained in 10 Graphics.” Middle East Eye, www.middleeasteye.net/news/saudi-arabia-economic-crisis-oil-coronavirus-debt-vision-2030.

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Comments

  1. Dr. Q September 15, 2021 at 12:19 PM

    Your analysis seems to imply that expansion in other sectors of the economy would necessarily result in a decline of activity in the oil sector, but is that actually the case?

    ReplyDelete
  2. Dr. Q September 15, 2021 at 12:22 PM

    What does it mean to say the the country of Saudi Arabia is a stakeholder? Does that include everyone who lives there? Everyone who is a citizen?

    ReplyDelete

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