Saudi Arabia's planned fiscal measures will likely allow the government to save around SR 362 billion in 2020, leading to a fiscal surplus of SR 162 billion, Jadwa Investment said in a new report on the kingdom's Fiscal Balance Program (FBP). This is compared to a SR 200 billion in deficit if no reforms are implemented, the investment firm added. According to the report, oil revenue is expected to reach SR 586 billion by 2020, compared to SR 520 billion implied in FBP's baseline scenario. "We estimate that FBP initiatives will save up to SR 100 billion in 2017, as the reduction in public sector worker allowances and wage freeze will contribute 55 percent to 2017 gross savings," the Jadwa report said. A 29 percent savings will come from energy price reform, while new measures to enhance the efficiency of spending and raise non-oil revenue will contribute 12 percent and 4 percent, respectively These initiatives will also help keep total government spending in an expansionary mode from 2018 to 2020. The government is planning to increase non-oil revenue from SR 199 billion in 2016 to SR 321 billion by 2020, which will reflect directly on the performance of the kingdom's non-oil private sector as additional costs are likely to impact growth. The FBP 2020 document expects non-oil revenue to rise as percentage of total expenditure from 21.4 percent in 2016 to 33.6 percent by 2020. According to the FBP, excise duties, levies on expatriates, VAT, and luxury tariffs are set to be the revenue levers to be implemented between 2017 and 2020. The Saudi government is also launching the "Household Allowance Program" to safeguard low- and middle income households from the effects of higher energy prices and a SR 200 billion private sector incentive package.
