Saudi Arabia budget posts SAR 34.1bn deficit in Q1 2020

Saudi Arabia posted a deficit of -SAR 34.1bn (-USD 9.1bn) in Q1 2020, compared with a surplus of SAR 27.8bn (USD 7.4bn) in the same period last year.  Revenues declined -21.7% y/y while expenses increased 4.0% y/y.  Oil revenue was down -23.8% y/y on lower oil prices while non-oil revenues were also affected by COVID-19 disruptions to consumption.  Taxes on goods & services, the largest component of non-oil revenue, were down -26% y/y in Q1 2020. 

Saudi Arabia first quarter budget outcomes

Source: Saudi Arabia MoF, Emirates NBD Research

On the expenditure side, current spending was up 5.1% y/y while – as expected – capital spending declined -3.5% y/y.  We expect further contraction in capex as the government looks to curb overall spending in the face of much lower than budgeted oil prices this year.  Wages and salaries account for two-thirds of current spending, and this increased 2.2% y/y in the March quarter.  There was also a large 74.5% y/y jump in the purchase of goods & services.  Spending on grants increased more than four-fold although this is only a fraction of overall expenditure in absolute terms.

The Q1 deficit of -SAR 34.1bn (-USD 9.1bn) was financed largely through debt issuance, although the current account was used to finance SAR 9bn (26%) of the shortfall.  The government’s current account at SAMA shows a SAR 20bn decline in Q1 2020 (increased balances in January and February were offset by a SAR 32.7bn decline in March).  The difference of SAR 11bn may be due to cash vs accrual accounting or the funds may have been transferred to other accounts. 

External debt of almost USD5bn and domestic debt of SAR 11.2bn (USD3bn) was raised in the first quarter of 2020.  The extra funds will be used to help cover the budget shortfall in Q2 2020.