Saudi Arabia laid out the biggest spending plan in the kingdom’s history in absolute terms when the government published its 2018 budget in late December.
After two years of austerity measures and budget deficits following the oil price dive in 2014, the sizable amount of slated expenditures for this year could seem counterintuitive.
Yet the amount of planned spending fits with the current turning point for the Saudi economy, which ranks as the world’s 20th largest in terms of gross domestic product, and meshes with plans laid out by Crown Prince Mohammed bin Salman for the country’s long-term economic future.
But the budget also extends state support to Saudi citizens even though weaning its citizenry from their reliance on subsidies is a long-term reform goal.
Moreover, to pay for its spending plan, the government is counting on untested new revenue sources, including newly instated taxes.
The 2018 budget follows familiar patterns of heavy state-backed development, which has been the story of Saudi Arabia’s economic growth since the 1950s.
As in the past, the 2018 plan calls for high government expenditures relative to GDP, with a total projected outlay of 978 billion riyals ($261 billion). And if the usual practice holds, actual expenditures are guaranteed to eclipse the budgeted amount.
The major breakdown of projected spending reveals a pattern that could also have been expected in previous decades.
In 1970, the year Saudi Arabia first published a five-year economic development plan and began to take a strategic approach to its budgets, it spent the most on defense, public utilities, education and transportation investments.
Similarly, defense spending, at 21 per cent of total expenditures, represents the largest slice of the 2018 plan. In addition, the kingdom is increasing the amount of money spent on infrastructure by 86 per cent and is boosting the amount devoted to municipal services. Even in the midst of aggressive economic reform, Saudi Arabia is spending big.