The Kingdom recorded a budget deficit of SAR 12.4 bn in the first quarter of 2024, with total government spending rising 8% y-o-y to SAR 305.8 bn at the same time as revenues grew 4% y-o-y to SAR 293.4 bn, according to the Finance Ministry’s latest figures (pdf). Public debt reached SAR 1.11 tn up from SAR 962.3 bn at the same time last year.

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Putting the figures in context: This marks the sixth quarter in a row in which the Kingdom has posted a budget deficit, and is four times higher than its shortfall in 1Q 2023, Bloomberg notes. However, on a quarterly basis, 1Q 2024’s budget deficit narrowed by c.66% q-o-q from 4Q 2023, when it came in at SAR 37 bn.

Still within budget expectations: The government had penciled a deficit of SAR 79 bn by theend of FY 2024, leaving it short of SAR 86 bn in total financing needs.

REMEMBER- Policymakers have accepted moderate deficits as the price of continuing to invest in growth. “ We intentionally decided to spend more and cause the deficit. If you spend that money right, on productive assets, then it’s money well spent,” Finance Minister Mohamed Al Jadaan said last year. He signaled it will continue to run deficits to support the “government’s strategic expansionary spending” even as it paced out some components of select gigaprojects. Some officials have taken to calling gigaprojects modular and Neom has gone on a drive to underscore to contractors and bankers that everything is on track.

THE BREAKDOWN-

Non-oil activity generated some SAR 111.5 bn in revenues in 1Q 2024, rising 9% y-o-y and accounting for 38% of total revenues generated for the quarter. Meanwhile, oil revenues grew 2% y-o-y to SAR 181.9 bn, making up 62% of revenues. Revenues from goods and services tax brought in SAR 69.9 bn in revenues, capital gains tax revenues hit SAR 6.5 bn, and taxes on trade and other items collectively hit SAR 9.7 bn.

Worker wages accounted for the lion’s share of total public spending in 1Q 2024, coming in at SAR 137 bn. The government spent SAR 60.7 bn on the use of goods and services..

Health + education + social welfare top the list of spending priorities: The government upped its spending on health and social welfare 28% y-o-y in the first quarter of the year to SAR 60.5 bn. Education spending came in as the second-largest spending item, growing 26% y-o-y to SAR 51.6 bn. Military spending was down 16% y-o-y to SAR 49.3 bn, making it the third-largest spending item during the quarter.

Also: Spending on general items — which includes pensions, social ins. payments, contributions to international organizations, government programs and utilities, and emergency allocations, among others — came in at SAR 42.8 bn, down 9% y-o-y. Meanwhile, government spending on municipal services grew 157% y-o-y to SAR 26.8 bn, posting the highest growth rate this quarter.

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