International report: Saudi Arabia supports OPEC Plus’ cohesion and relies on non-oil revenues

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An economic report said that Saudi Arabia was able to maintain the cohesion of the OPEC Plus alliance, in order to support oil prices to achieve the desired balance in the budget by 2023. Reuters indicated in an expanded report that Saudi Arabia needs to increase non-oil revenues, increase oil prices and make adjustments to the fiscal balance plan in 2030. The Kingdom recently launched a partnership program with the private sector, which aims to diversify sources of income, which requires state companies to reduce the dividends they pay to the government in order to boost capital spending.”If the dividends are reduced, a higher price for oil will support Aramco’s transfers to the country through taxes and royalties as an alternative,” Jean-Michel Saliba, a Middle East and North Africa economist at Bank of America, said in a research note. “Saudi Arabia has managed to keep the OPEC + group together so far, but there were some indications of greater internal and external pressure to increase the group’s production from May,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. The Saudi government reduced its budget for 2021 by 7% to curb a deficit that rose to 12% of GDP, from 4.5% in 2019. It also plans to reduce expenditures to 941 billion riyals in 2023 from 990 billion this year, and Fitch Ratings expects a financial deficit of about $ 40 billion this year, assuming an average oil price of $ 59 a barrel, an average production of 8.7 million barrels per day and a spending trillion riyals.

The government will need an oil price at $ 76 a barrel to adjust its budget this year, said Chrysiannis Crostens, director in Fitch’s sovereign ratings team, but in light of the current distribution policy, and with production recovering, the price that achieves parity in revenues and expenditures may fall to about $ 60 a barrel.

A poll conducted by Reuters last week showed that oil prices will stabilize at about $ 63 a barrel this year, supported by the distribution of vaccines and curbing global oil supplies by about 6.8 million barrels per day.

Ravi Bhatia, an analyst at Standard & Poor’s Global, said that if the strategy leads to increased investments by large companies in the Saudi economy, diversification of resources and greater growth, this will in turn support fiscal revenues in the medium term. A spokesman for the Ministry of Finance said that it is unlikely that there will be a major change in the medium-term fiscal discipline plans included in the 2021 budget, and we look forward to working in partnership with the private sector through various means such as public-private partnerships, privatization and other means of shifting capital spending to a greater degree than It is the responsibility of the government during this period.

Last year, foreign direct investment totaled $ 5.5 billion, but the plan, whose outlines the Crown Prince announced, expects inflows of foreign direct investment in excess of $ 500 billion over the next 10 years. The Public Investment Fund had said it was targeting 150 billion riyals annual investments between 2021 and 2025.





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