As the year comes to a close, Saudi Arabia has revealed its 2020 budget ... and it's worth billions.
The kingdom is set to spend $272 billion next year in what has been described as a major privatization push amid a stretching budget deficit. However, the kingdom's spending forecasts are much lower than what was set for 2019 at the same time last year.
"The 2020 budget comes amid challenges, risks and protectionist policies facing the global economy, which requires flexibility in managing public finances," Crown Prince Mohammed bin Salman said in a statement to press.
The world's largest crude exporter expects to make $222 billion in revenues, with a projected deficit of nearly $50 billion in 2020; this number is the equivalent of 6.4 percent of GDP. The deficit will be financed by foreign and local bond issuance, according to Arab News.
The kingdom predicts real GDP growth of about 2.3 percent in 2020.
Saudi Arabia refutes claims that it is "running out of money"
This week, Saudi Arabia's finance minister rejected claims that the kingdom is short on cash.
"No we are not running out of money," Mohammed al-Jadaan firmly told CNBC.
Last month, the former chief of the CIA David Petraeus told the business news site that he believed Saudi Arabia is "gradually running out of money," with regards to the country's sovereign wealth fund.
Following the budget announcement, the finance minister said the kingdom held the "third-largest pot of foreign cash reserves in the world." He also added that Saudi Arabia has "significant funds" and "a lot of assets" at its disposal.
Cost-of-living allowances will continue
The 2020 budget displayed a conservative outlook on revenues partly due to the status of the global economy, al-Jadaan said.
Still, the government will continue to pay a cost-of-living allowance to citizens. King Salman ordered the extension of these allowances for an additional year until the end of 2020.
These monetary contributions came into play in 2018 when a government allowance scheme was established, allowing low and middle-income Saudi households to benefit from additional funds. The funds meant to curb the effects and strains of the kingdom's economic reforms on less fortunate families.
Dubbed the "royal allowances," the funds will continue to be given to civil servants and military personnel.
Revenues expected from partial sale of Aramco
State-owned oil giant Saudi Aramco is set to be listed this week after years of delay.
The kingdom's finance minister said the proceeds from Aramco's share offering would be re-invested in other sectors, creating more revenue flows for the government.
"We are determined to continue executing the economic reforms and diversifying income sources, including re-investing the proceeds of the Aramco IPO through the Public Investment Fund," King Salman said at a budget cabinet meeting.
Aramco's public offering has been priced at 32 riyals ($8.53) per share and aims to achieve the biggest initial public offering (IPO) in history by raising $25.6 billion for the kingdom.
The Saudi economy has faced challenges over the collapse of oil prices. Thus, the new budget aims to "bring stability" to the kingdom's revenue stream.
"The widening of the deficit, despite spending cuts, is a clear reflection of the fiscal challenges facing the Saudi budget at current oil prices," Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes, told Bloomberg.
Government spending on "general items" set to increase
Having said that, the government plans on spending money on areas aside from oil. The kingdom aims to optimize "the use of available resources, empowering the private sector, and raising the level of transparency and efficiency of government spending to boost growth and development rates."
According to Al Jazeera, the government will be allocating $37 billion on government pensions, social insurance, and subsidies. The amount is $5 billion higher than that projected in 2019.
According to Al Arabiya, Saudi Arabia will also be allocating around $51.73 billion towards education and human resource development in the coming year.
The government's economic transformation is improving steadily in line with Vision 2030. The budget for the coming year reflects Saudi Arabia's commitment to the reforms. It has already proved to be successful.
A report published by IHS Markit, a London-based global information provider, revealed that Saudi Arabia's economy "recorded its biggest increase in new work in more than four years in November."
Saudi Arabia is diversifying its economy like never before
In recent years, the country has been working towards diversifying its economy through bolstering several new sectors.
The country has started making profits out of several sectors it seldom profited from in previous years. These include tourism, entertainment, and sports. The Saudi tourism industry has seen major growth in recent months.
MBS also highlighted the importance of the private sector in the nation's economy. He confirmed that opportunities for the private sector will continue to increase next year. In turn, this will allow the economy to further grow and create job opportunities in the kingdom as well.