Saudi Arabia’s budget for the new fiscal year demonstrates a determination to pursue policies to generate optimum growth. It forecasts higher revenues and expenditures, of $261 billion and $209 billion, and leaving a deficit of $52 billion. It represents the kingdom’s biggest ever budgetary spending.

On top of the spending is the recently announced $19 billion stimulus package for the private sector. Among others, the scheme is designed to help with residential housing loans, export financing, support distressed companies, and provide incentives for small and medium-sized enterprises.

Concurrently, the revenue side compares favourably with those from recent years; total revenues were projected at $185 billion in 2017, while the actual amount for 2016 was $141 billion.

The higher revenue figures partly reflect the introduction of value-added tax at the start of 2018. In fact, the government started another taxation in June last, namely the excise tax on tobacco products, energy and fizzy drinks, the first time by any Gulf country.

Other measures aimed at boosting revenues entail a reduction of subsidies, as well as higher fees for governmental services. Officials have simultaneously developed special plans to help locals cope with the higher cost of living.

The Citizens Account intends to compensate the less well-off deal with the rise in living expenditures. It is believed that more than half of Saudi nationals have applied to benefit from the account, but many would drop out during the screening process.

Oil-generated income is expected to account for 63 per cent of total revenues with the balance from taxes, fees and investment returns.

Another noticeable development is the steady fall in the magnitude of budget deficits. This was $98 billion in 2015, the first full year following the plunge of oil prices, and declined to $79 billion in 2016. The gap for fiscal year 2017 was originally set at $53 billion but is believed to have reached $61 billion as a result of higher than forecasted spending.

But the share of public finance continues to decline steadily as a share of GDP. The deficit stood at 15 per cent in 2015, 12.8 per cent in 2016, 8.9 per cent in 2017 and possibly 8 per cent in 2018.

The authorities are aiming for a balanced budget in 2023 rather than 2020, as was originally forecast. The new date is more realistic, as the kingdom’s public spending needs adjust to diverse non-oil revenues.

If history is any guide, the kingdom should not face difficulties securing financing for the budgetary deficit. In September, the kingdom secured $12.5 billion for its bonds sold in three tranches, including one with a 30-year tenor. And in April, the country secured $9 billion from the sale of Islamic bonds. The moves were designed to bridge the deficit in fiscal year 2017.

Simultaneously, the kingdom succeeded in raising a record $17.5 billion in 2016 on its return to global capital markets. The sale was met with exceptional demand from institutional investors, collectively subscribing $67 billion, and thereby allowing for cheaper funding costs and a higher amount of borrowing.

Oil prices have been experiencing a modest rise, in particular thanks to cooperation between Saudi Arabia and Russia concerning a reduction in production in line with Opec’s move. This occurred during the historic visit by the Saudi monarch to Russia this year.

The writer is a Member of Parliament in Bahrain.