Minister of Finance Mohammed Al-Jadaan
Saudi Arabia’s government aims through the Fiscal Sustainability Program (FSB) to reduce the impact of external factors on the Kingdom, including oil market fluctuations, Minister of Finance Mohammed Al-Jadaan said at the Financial Stability Forum held today, Nov. 25.
The country aims to achieve this by adopting financial rules that ensure fiscal sustainability and sustainable development, he added.
The financial rules lay out new methodologies to set expenditure ceiling in the medium term, based on the approved structural oil revenue estimates rather than forecasts, the minister said.
These rules also are based on the historical average of real revenue for a long period and the estimated non-oil revenue to total non-oil gross domestic product (GDP) to jointly define the spending ceilings.
These rules will help limit spending volatility and the related negative repercussions.
Moreover, minimum and maximum limits of government reserves are also included in these rules, in order to deploy the surplus, if any, to boost reserves, support development funds and the Public Investment Fund (PIF), or partially pay off the public debt.
This aims to curtail repeat of earlier mistakes and spending the reserves in aspects that do not ensure long-term benefit for the state or its citizen.
The Kingdom’s economy has been gradually recovering since mid-2020, demonstrating stronger performance this year, Al-Jadaan affirmed, pointing to the positive growth rates in the real non-oil sector and the preliminary estimates for GDP growth during the third quarter of the year.
The Saudi government continues to deal with the COVID-19 pandemic, adopting actual, transparent and responsible policies and measures that have already mitigated the pandemic’s financial, humanitarian, and economic impacts, putting the Kingdom on the path of recovery and stability.
Fiscal stability begins with a reference to the public finance policies that work on achieving balance between the financial stability and economic growth, in order to support the economic and social transformation seen by the Kingdom in line with Vision 2030, Al-Jadaan stressed.
The government rolled out a series of financial and economic reforms to make a comprehensive economic change and a major development shift in the medium and long-term, the minister concluded.
Elsewhere, Al-Jadaan affirmed that the fiscal policies adopted today by the Kingdom seek to achieve fiscal stability and avoid any negative economic impact, underlining that fiscal stability is an important factor for the economy as a whole, not for the public and private sectors only.
Replying to a question about the Kingdom’s debt, the minister said that the government did not face any challenges to debt issuances even through the worst time during the pandemic. The debt repayment depends on several factors, including interest rates.
Additionally, a credit rating is very important not only to the government, as its impact extends to the private sector and individuals, Al-Jadaan highlighted, concluding that the Kingdom is keen on the positive impact of the fiscal policy on its credit rating.
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