Saudi Arabia, the world’s top crude oil exporter, will hold the huge revenues it is currently receiving at $100-plus oil in its current account and will not immediately spend it on development, growth, and diversification projects as it did in the past boom cycles for oil prices.
After years of budget deficits when oil prices slumped in 2015-2016 and in 2020, the Kingdom is now enjoying a budget surplus, but it is not in a hurry to boost government spending, Bloomberg reports.
“The surplus achieved in Q1 is shown in the government current account and has not yet been deposited to government reserves nor transferred to other groups,” Saudi Arabia’s Finance Minister Mohammed Al-Jadaan said in a statement to Bloomberg. “This allocation will occur after the surplus is realized, which means after the closing of the fiscal year,” the minister added.
During this upcycle, the Saudis are intent on replenishing coffers before increasing spending. It’s likely that the Kingdom will first repay debts and transfer some cash into the sovereign wealth fund or the National Development Fund, which invests in infrastructure in the country.
Saudi Arabia, which has suffered through the previous busts in the oil industry when reserves quickly vanished with oil prices crumbling, now looks to have a fiscal sustainability plan under which reserves don’t drop below a certain share of GDP.
“According to that policy, our reserves shall not fall below a certain percentage level of GDP. That figure would be in the double digits,” al-Jadaan told Reuters earlier this week.
Currently, Saudi Arabia is enjoying a windfall from the high oil prices.
The Kingdom booked a budget surplus of $15.3 billion (57.491 billion Saudi riyals) in the first quarter of 2022, the ministry of finance said earlier this month. Oil revenues soared by 58 percent to $49 billion (183.7 billion Saudi riyals) between January and March.
The value of Saudi Arabia’s oil exports soared by 123%, or by $16.7 billion, in March 2022 compared to the same month last year, the General Authority for Statistics said yesterday.
For full-year 2022, oil revenues in Saudi Arabia are expected to surge by 66 percent to around $249 billion, Riyadh-based Jadwa Investment said earlier this month.
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By Tsvetana Paraskova for Oilprice.com
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