Empowerment

& Sustainability

Budget Statement
F i s cal Y ea r 2 0 2 2

ENGLISH TRANSLATION OF THE OFFICIAL ARABIC VERSION

Contents

03 List of Abbreviations

05 Introduction

06 Executive Summary of Fiscal and Economic Framework

First: Economic Developments and Outlook for FY 2022

13
and the Medium-Term
14 A. Global Economic Developments

B. Domestic Economic Developments in FY 2021 and

18 Projections for the FY 2022 and Medium-Term
Second: Fiscal Developments and Outlook for FY 2022
27
and the Medium-Term
28 A. Fiscal Developments for FY 2021

36 B. FY 2022 Budget and Medium-Term Projections

C. Revenue Scenarios Based on Global Economic
43 Developments
46 D. Expenditures by Sector in the Budget for FY 2022

61 Third: Fiscal and Economic Enablers

62 1. Public Finance Enablers

71 2. Economic Enablers

78 3. Structural Transformations

84 Fourth: Key Fiscal and Economic Risks and Challenges

BUDGET STATEMENT Fiscal Year 2022

List of Abbreviations

Bn Billion

CAPEX Capital Expenditures

CPI Consumer Price Index

EXIM Saudi Export-Import Bank

EXPRO Expenditure and Projects Efficiency Authority

FBP Fiscal Balance Program

FDI Foreign Direct Investment

FSDP Financial Sector Development Program

FSP Fiscal Sustainability Program

FY Fiscal Year

GASTAT General Authority for Statistics

GCI Global Cybersecurity Index

GDP Gross Domestic Product

HCI Human Capital Index

HCTP Human Capability Development Program

IMF International Monetary Fund

Infath Entrustment and Liquidation Center

MOF Ministry of Finance

NDF National Development Fund

NIDLP National Industrial Development and Logistics Program

NDMC National Debt Management Center

NIS National Investment Strategy

BUDGET STATEMENT Fiscal Year 2022 3

 NTP National Transformation Program

OPEC Organization of the Petroleum Exporting Countries

OPEC+ A group of OPEC and non-OPEC oil-producing states

OPEX Operational Expenditures

PIF Public Investment Fund

PMI Purchasing Managers’ Index

QFI Qualified Foreign Investor Program

SAMA Saudi Central Bank

SAR Saudi Riyal

SDAIA Saudi Data and Artificial Intelligence Authority

Shareek Private Sector Partnership Reinforcement Program

SMEs Small and Medium Enterprises

TASI Tadawul All Share Index

TDF Tourism Development Fund

Tn Trillion

UNCTAD United Nations Conference on Trade and Development

USD United States Dollar

VAT Value Added Tax

VRPs Vision Realization Programs

WEO World Economic Outlook

WPI Wholesale Prices Index

ZATCA Zakat, Tax and Customs Authority

BUDGET STATEMENT Fiscal Year 2022 4

Introduction

The Ministry of Finance (MOF) is pleased to issue the Budget

Statement for FY 2022, which illustrates the details of the approved
budget in terms of revenues; expenditures by economic classification,
sector, and most important projects and programs; and the levels
of deficit/surplus, debt, and reserves. The Budget Statement also
illustrates the most prominent fiscal and economic developments
for FY 2021 and the fiscal framework and economic outlook for the
medium-term; the most important fiscal, economic, and structural
enablers; as well as the most significant challenges facing the
economy during the coming fiscal year and in the medium-term.

The Budget Statement represents a continuation of the MOF’s

approach to enhance the level of fiscal disclosure and transparency,
which is one of the pillars of the process in developing the preparation
and execution of the budget and raising the efficiency of managing
public finances. The budget classification used in this document
follows, on a cash basis, the International Monetary Fund’s (IMF)
Government Finance Statistics Manual (GFSM2014), which is a global
standard classification.

BUDGET STATEMENT Fiscal Year 2022 5

Executive Summary
of Fiscal and Economic Framework

After two successive, and exceptional years that were largely

shaped by the COVID-19 pandemic, the Kingdom is witnessing a
gradual return of economic and social activity to its pre-pandemic
levels. The Government succeeded in addressing the pandemic
through balanced policies that entailed extending strong support
to the health sector and to the affected private enterprises, while
maintaining the fiscal sustainability for the medium-and long-term.
These policies reflected positively on the substantial recovery of
the domestic economy, which witnessed an accelerated growth in
several economic activities.

The budget for the FY 2022 is structured to support the continuous

enhancement of fiscal sustainability following the pandemic;
continuing the rollout of economic and structural reforms to enhance
economic growth in the medium-and long-term; and strengthening
the Kingdom’s fiscal position to deal with shocks. Moreover, the
budget is a reflection of an encompassing economic policy that is
underpinned by three main pillars. The first pillar is ensuring fiscal
sustainability through diversification of revenue sources and raising
expenditure efficiency. The second pillar is enabling the private sector
through programs that target enhancing the sector’s productivity
and its contribution to the national economy, in addition to the
projects and programs executed by the development funds. The third
pillar is the implementation of broader structural transformations,
with economic and social dimensions, to enhance the agility of the

BUDGET STATEMENT Fiscal Year 2022 6

economy and its ability to keep pace with the rapidly changing global
landscape.

Within the ambit of the first pillar, FY 2022 budget reflects the
continuation of the process of economic reform initiatives that the
Government has been taken in previous years, along with ongoing
efforts to increase public spending efficiency, developing non-oil
revenues and improve the collection. These reforms succeeded
in controlling budget deficit during the past years and reducing
it gradually from levels that reached 12.8% of Gross Domestic
Product (GDP) in FY 2016, and expected to reach 2.7% of GDP in
FY 2021. Public finance is expected to witness the achievement of
surpluses starting in FY 2022 and in the medium-term, which will
be directed to investments, that aim to diversify the economy, and
enhance reserves to address any future shocks might encounter the
economy. It’s worth noting that upon achieving the main goals of the
Fiscal Balance Program (FBP), the Government launched the Fiscal
Sustainability Program (FSP), which represents a continuation of the
previous efforts and the adoption of mechanisms for managing fiscal
policy with the aim of achieving fiscal sustainability in the medium
and long-term.

Within the ambit of the second pillar, the Kingdom’s economy is

witnessing continuous growth in the role of the economic enablers
that support the growth of the private sector in the medium- and
long-term. The most prominent of these enablers is the highly
effective development contribution of projects and programs
that are implemented by the Public Investment Fund (PIF) and
the National Development Fund (NDF) that complements budget
spending, within a cohesive and integrated frame. Moreover,

BUDGET STATEMENT Fiscal Year 2022 7

the enablers include the progress in the implementation of the
National Industrial Development and Logistics Program (NIDLP),
the National Investment Strategy (NIS), the “Shareek” Program, the
Financial Sector Development Program (FSDP), and the Privatization
Program, all are programs that aim to enhance the performance
of the private sector. Concurrently, the success of these programs
reflects positively on the fiscal performance through stimulating
and diversifying economic growth, and thus improving non-oil
revenues while reducing pressure on public spending, especially
as the private sector is leading investment and employment, while
the implementation of the National Transformation Program (NTP)
continues.

Within the ambit of the third pillar, the budget and the medium-
term fiscal framework reflect the continued spending on government
services, infrastructure and social programs, as well as other Vision
Realization Programs (VRPs), such as the NTP, the Quality of Life
Program, the Doyof Al Rahman Program, mega projects, and the
Saudi Green Initiative. These programs will bring about positive
structural changes in these sectors and reflect positively on the
quality of life of citizens and residents, and on the services provided
to them.

Below is a brief on some of the developments in the fiscal and

economic performance for the current year, FY 2021, and the key
features of the Kingdom’s budget for FY 2022:

The economic activity performance indicators have shown

significant growth until the end of the third quarter of 2021, indicating
the continued recovery on the back of relaxed precautionary

BUDGET STATEMENT Fiscal Year 2022 8

measures as a result of the rapid rise in immunization rates.
Accordingly, the preliminary estimates for FY 2021 indicate a 2.9%
annual increase in real GDP driven by a rise in non-oil GDP, which is
expected to grow by 4.8%. In FY 2022, estimates indicate a growth
of 7.4% in real GDP driven by the anticipated rise in oil GDP, which
is tied to the OPEC+ agreement. In addition, non-oil GDP is expected
to improve as the economy continues to recover from the pandemic,
and as the Government continues to strengthen the role of the
private sector as the main driver of economic growth through the
aforementioned enablers.

With regard to the developments in the fiscal performance in FY

2021, total revenues are expected to reach SAR 930 billion (bn), up
19.0% from FY 2020 and 9.6% compared to the approved budget,
mainly due to the economic recovery after the pandemic, the increase
in the Value Added Tax (VAT) rate that has been implemented since
July 2020, and the developments in the oil markets, where the
average price of Brent crude oil reached around $69.5 per barrel as
of October 2021.

In FY 2022, total revenues are expected to reach SAR 1,045 bn,

an increase of 12.4% compared to the estimates for the FY 2021.
This is attributed to the developments in the fiscal and economic
performance and the global markets this year, and to the continued
efforts to implement the initiatives that were approved in previous
years.

It is estimated that total expenditures for FY 2021 will reach around

SAR 1,015 bn, an increase of 2.6% over the approved budget. The
excess of total expenditures over the budget is a result of several key

BUDGET STATEMENT Fiscal Year 2022 9

factors, the most important of which is the expenditure associated
with the COVID-19 pandemic. This includes the costs of purchasing
the vaccine and expanding the age groups of those included in the
vaccination plans to a larger segment than what was planned for; in
addition to the increase in zakat revenue and, subsequently, in the
social benefits spending associated with it; as well as an increase
in external support, which reflects the Kingdom’s pivotal role in
supporting the global economy and its stability in a manner that
achieves the Kingdom’s interests as well. Despite the expectation
of an increase in expenditures in excess of what was approved in
the budget, it is still lower by roughly SAR 60 bn when compared
with the actual performance of last year FY 2020, supported with
a decrease in the exceptional pandemic-related expenditures
throughout last year.

In the medium-term, the Government aims to continue its efforts

to implement reforms supporting the improvement of fiscal
management to achieve fiscal discipline and enhance spending
efficiency. It will also continue to review and improve social
protection programs to improve their effectiveness in reaching the
target recipients and achieve the desired benefits. In FY 2022, total
expenditures are estimated at SAR 955 bn, and they are expected
to reach SAR 951 bn in FY 2024, as a reflection of the Government’s
commitment to previously announced ceilings, which are determined
in accordance with the medium-term budget planning and the
mechanisms for setting expenditure ceilings under FSP.

The budget deficit is estimated to reach 2.7% of GDP in FY 2021,

approximately 2.3 percentage points lower than the approved budget,
with surpluses, amounting to 2.5% of GDP, projected to be achieved

BUDGET STATEMENT Fiscal Year 2022 10

next year, FY 2022. It is worth noting that the achieved surpluses in
the budget will be directed to bolster government reserves, support
the NDF and the PIF to consider the possibility of accelerating the
implementation of some strategic programs and projects with
economic and social dimensions, or partially repay the debt based
on market conditions.

The MOF is working in collaboration with the National Debt

Management Center (NDMC) to prepare an annual borrowing plan
to meet financing needs, as part of a medium-term debt strategy.
The debt is expected to reach approximately SAR 938 bn in FY 2021
(29.2% of GDP). Debt stock in FY 2022, is estimated to be within a
range close to the levels of debt stock in FY 2021 as a result of the
estimated surpluses in the budget. New borrowing will be directed to
repayment of principal that will be due in the future, capitalizing on
the right opportunities in the market to support government reserves,
or financing capital projects that can be accelerated through debt
issuances. It is worth noting that the debt-to-GDP ratio is projected
to decrease in FY 2024 to 25.4% as a result of the projections of GDP
growth.

Government reserves at the Saudi Central Bank (SAMA) are

expected to reach SAR 350 bn by the end of FY 2021, lower by around
SAR 9 bn compared to FY 2020. This amount will be used to cover the
residual financing needs that were not covered by debt issuances,
which are mainly financing to the private sector stimulus packages.
It is worth noting that the expected balance of government reserves
at the end of FY 2021 is higher than the estimates at the beginning
of the year by SAR 70 bn, driven by the improvement in the economic
factors influencing public finance.

BUDGET STATEMENT Fiscal Year 2022 11

Medium-term Fiscal Projections
(SAR bn, unless otherwise stated)

Actual Budget Estimates Budget Projections

2020 2021 2021 2022 2023 2024

Total Revenues 782 849 930 1,045 968 992

Total Expenditures 1,076 990 1,015 955 941 951

Budget Deficit/Surplus -294 -141 -85 90 27 42

As percent to GDP -11.2% -4.9% -2.7% 2.5% 0.8% 1.1%

Debt 854 937 938 938 938 938

As percent to GDP 32.5% 32.7% 29.2% 25.9% 26.9% 25.4%

Source: MOF
Figures are rounded up to the nearest decimal point

It is worth noting that revenue estimates for FY 2023 and 2024 are
based on a conservative methodology as per the fiscal rules in the
FSP, and not on future estimate of revenues.

BUDGET STATEMENT Fiscal Year 2022 12

01
Economic Developments
and Outlook
FY 2022 and the Medium-Term
A. Global Economic Developments
Global Economic Growth
After the negative repercussions of the spread of the COVID-19
pandemic on the global economy during last year, FY 2021 is
expected to witness a return to positive growth rates. The projected
growth is largely due to the strong recovery in the economies of
some advanced countries, emanating from the injection of a set of
stimulus packages and the gradual return to regular life in many
countries after the rapid rollout of the vaccines and the completion
of the required dose of the vaccine, followed by the relaxation of the
imposed restrictions on economic activities. In the World Economic
Outlook report for October 2021, the IMF predicted that the global
economy will grow by 5.9% in 2021, the fastest growth pace over the
past eight years, and by 4.9% in 2022. This is driven by the expected
growth in the world’s largest economies, primarily the United States
and China. Overall growth in the advanced economies is projected to
reach 5.2% for 2021, and 4.5% in 2022, following the observation of
the signs of recovery from the pandemic across the globe. However,
uncertainty still surrounds the global economy as a result of the
continuous, rapid development in the pandemic, which may have
negative ramifications on many economies.

Global Economic Growth and Inflation Outlook

2019 2020 2021 2022
Years Actual Actual Estimates Estimates
Global Economy 2.8% -3.1% 5.9% 4.9%
Advanced Economies 1.6% -4.5% 5.2% 4.5%
Emerging Market &
3.7% -2.1% 6.4% 5.1%
Developing Economies
USA 2.2% -3.4% 6.0% 5.2%
China 6.0% 2.3% 8.0% 5.6%
Japan 0.0% -4.6% 2.4% 3.2%
India 4.0% -7.3% 9.5% 8.5%
Euro Area 1.3% -6.3% 5.0% 4.3%
Saudi Arabia 0.3% -4.1% 2.8% 4.8%
Inflation
Inflation in Advanced Economies 1.4% 0.7% 2.8% 2.3%
Inflation in Emerging Market &
5.1% 5.1% 5.5% 4.9%
Developing Economies
Source: IMF - WEO, October 2021

BUDGET STATEMENT Fiscal Year 2022 14

The Purchasing Managers’ Index (PMI)
The PMI is one of the most important economic indicators that
track the global activity of the non-oil private sector. The PMI
indicates that global industrial production has begun to recover from
the repercussions of the COVID-19 pandemic, The PMI recording a
clear rise above the 50-point level in many countries, starting from
February until October 2021. Although, It should be noted that the
Chinese economy was the fastest to emerge from the deflationary
zone and its score on the index has begun to decline since last June
falling gradually below the expansion area, driven by a slowdown
in energy-intensive sectors that has widely affected the overall
performance of manufacturing industries, and then began to enter
the expansion area in October 2021.
Point

62
58.5
59 58.4
57.7
56

53.2
53
50.6
50 50.2

47
50.00

44

41

38

35

32
January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

2020 2021

Saudi Arabia Japan China European Union United States South Korea

Source: IHS Markit

BUDGET STATEMENT Fiscal Year 2022 15

Oil Markets
The average of the prices of oil (Brent) witnessed, since the
beginning of 2021 until October, a rise by 69.5% to record about
$69.5 per barrel compared to $41.1 per barrel during the same
period in the previous year. The observed rise in oil prices until
October 2021 was driven by the increase in vaccine rollout around
the world. which lessened the effects of the pandemic; the rise in
global demand for transportation; and the efforts made by the OPEC+
member states since the outbreak of COVID-19 and their important
role in rebalancing oil markets. The average price of oil reached its
lowest level during the pandemic in April 2020 at $18.4 per barrel,
compared to $83.5 per barrel in October 2021.

90.0 83.5

80.0 75.2 74.5

73.2
70.8
68.5
70.0 63.8 65.4 64.8
62.3
60.0 55.7 54.8
50.0
50.0
43.2 44.7 42.7
40.3 40.9 40.2
40.0
Dollars / barrel

32.0
29.4
30.0 Brent average prices USD

18.4
20.0

10.0

0.0
January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

2020 2021

Source: U.S. Energy Information Administration (EIA)

With regard to production, the Kingdom’s average production from

the beginning of 2021 to the end of October reached approximately
8.9 million barrels (per day), which is a decrease of 319.0 thousand
barrels (per day) representing a 3.4% reduction compared to the
same period of last year. This reduction is due to the Kingdom’s

BUDGET STATEMENT Fiscal Year 2022 16

 commitment to voluntary reduction to support the stability of oil
prices. The Organization of the Petroleum Exporting Countries (OPEC)
estimated that the total global oil demand for 2021 will grow by
6.4% compared to last year, taking total global demand to about 96.6
million barrels (per day), an increase of about 5.82 million barrels (per
day). According to preliminary data released in OPEC’s October 2021
report, global oil demand is expected to grow by around 4.3% in 2022
to reach 100.8 million barrels (per day) compared to around 96.6
million barrels (per day) in 2021. These estimates for FY 2022 take
into account the economic recovery in major consuming countries
and the growth in their economic activities as the precautionary
measures are maintained and the rates of vaccination grow. OPEC
also forecasts oil demand in the Middle East to grow by 3.0 million
barrels (per day) in 2022, due to economic recovery in many sectors
led by petrochemicals and transportation.
14.0

12.0
12.0

10.0
9.7 9.8 9.7 9.5 9.6 9.7 9.8
9.0 9.0 9.0 9.0 9.0 9.1 8.9
8.5 8.5 8.1 8.1 8.1 8.5
8.0 7.5
Million barrel/day

6.0

4.0

2.0

0.0
January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

2020 2021

Saudi's average crude oil production

Source: OPEC Monthly Oil Market Report issued October 2021

BUDGET STATEMENT Fiscal Year 2022 17

B. Domestic Economic Developments
in FY 2021 and Projections for the FY 2022 and Medium-Term

Domestic Economic Growth

The Real Sector
Real GDP has witnessed1, from the beginning of FY 2021 until the
end of the third quarter, a growth of 1.8% compared to the same
period last year as real non-oil GDP recorded high growth rates
that reached 5.4%, driven by the performance of the private sector
which recorded a growth of 7.0%. This reflects the improvement in
economic activities in general. Real oil GDP, however, decreased by
3.4%, which is due to the Kingdom’s voluntary reduction of crude oil
production.
Indicators of economic activities have seen remarkable
improvement in the third quarter of FY 2021, indicating the sustained
momentum of recovery, with the rise in immunization rates that
propelled community immunity past 70% across all regions in the
Kingdom. The swift increase in the immunization rates has yielded a
further relaxation of the precautionary measures, allowing a partial
return of students to educational institutions. This had a positive
impact on consumption levels.
Preliminary estimates indicate that real GDP is expected to
increase by 2.9% in FY 2021, driven by a rise in real non-oil GDP by
4.8%. Meanwhile, the inflation rate in the same year is expected to
rise to 3.3% on average, taking into account the fading impact of the
increase in the Value Added Tax (VAT) in the second half of the year.
Main consumption indicators have recorded positive growth rates,
with point of sales (POS) and e-commerce recording a growth since
the beginning of the year until the end of October, of 35.8% and 94.1%
respectively, as cash withdrawals decreased by 6.7% for the same

The H1 data areFiscal

actual,
Yearwhereas Q3 data are based on the GASTAT’s Flash Estimates 18
1
BUDGET STATEMENT 2022
period. This decrease in cash withdrawals is due to the shift in the
consumption behavior from cash to electronic payment methods.
It is worth mentioning that the reforms to the kingdom’s digital
infrastructure contributed to the acceleration of digital transformation
during the crisis through offering electronic payment options that
presented an ideal option to the citizens and residents across the
Kingdom, in addition to the Government’s initiatives towards the
transformation to a society that is less reliant on cash through the
efforts of SAMA, and the Saudi banks, to promote financial inclusion.
Private investment indicators have also shown a marked return
to economic activity in the third quarter of FY 2021, with the PMI, an
index for the business climate and non-oil economy performance,
indicating that the reading reaching 57.7 in October of this year, which
is an annual growth rate of 13.1%. This indicates an improvement
in the non-oil private sector in the Kingdom due to the rise in the
general level of confidence in the business sector. Moreover, the
cement sales average, from the beginning of the year until October of
FY 2021, recorded an increase of 1.8% compared to the same period
of last year. This is due to the continuous work to execute the mega
projects, in addition to the on-going implementation of the programs
and initiatives of the Ministry of Municipal Rural Affairs and Housing.
Labor market data issued by the General Authority for Statistics
(GASTAT) indicate the decrease in the unemployment rates for
Saudis in Q2 FY 2021 to reach 11.3% compared to 11.7% in Q1, and
15.4% in Q2 FY 2020. The recovery in the labor market is due to the
broad recovery in the Saudi economy, especially during H1 FY 2021,
in addition to the Government’s continuous efforts in nationalization
programs, which contributed to the increase in the number of citizens
working in various sectors. According to the National Observatory

BUDGET STATEMENT Fiscal Year 2022 19

for Labor, the rate of nationalization in the private sector increased
to 23.6% in Q3 FY 2021, which is an increase of 0.96% compared to
the previous quarter.

The Monetary Sector

Money supply increased at the end of October 2021 by 7.9%,
driven by the growth in demand deposits by approximately 7.5% and
time and savings deposits by 1.6% on an annual basis. Bank credit
to the private sector also grew by nearly 16.1% in the Q3 FY 2021.
It should be noted that SAMA has extended the Deferred Payment
Program, one of its programs to support private sector financing,
until the end of December 2021, as part of the ongoing efforts to
support the sector of micro, small and medium enterprises, which
is still affected by the precautionary measures taken to address the
COVID-19 pandemic.
It should be noted that total consumer loans increased on an
annual basis by 16.9% in Q3 FY 2021. Moreover, total mortgage
loans granted by commercial banks to individuals and companies
increased by approximately 36.0% annually by the end of Q3 FY
2021 compared to the same period last year. This was driven by
government support to beneficiaries of housing programs, as loans
granted to individuals, which amount to 77.3% of total mortgage
loans, recorded a growth of 47.8% during Q3 FY 2021, on an annual
basis.
According to GASTAT, the annual growth in the Consumer Price
Index (CPI) (Inflation) recorded an increase of 0.4% in Q3 FY 2021, as
a result of the fade of the base effect of the VAT increase starting last
July. The CPI average since the beginning of the year until October
recorded an increase of 3.5% compared to 3.0% in the same period
last year.

BUDGET STATEMENT Fiscal Year 2022 20

 The Wholesale Prices Index (WPI) continued its upward trajectory
during the third quarter of 2021 compared to the same period last
year to record growth of 11.9%, represented by a 9.4% increase in
the metal products, machinery and equipment section, and a 7.0%
increase in the raw materials and minerals section during the same
quarter. Moreover, the index recorded a growth since the beginning
of the year until October at 12.0% compared to the same period last
year.
In the third quarter of 2021, the Real Estate Price Index grew by
0.53% compared to the same period last year, as a result of a 1.09%
increase in residential property prices.

Trade Balance
The performance of the external sector has shown gradual
improvement, with trade rising as a result of the easing of
precautionary measures worldwide. Data published by the GASTAT
showed a 35.5% increase in the value of the non-oil exports from
the beginning of 2021 until September compared to the same period
last year. Moreover, the value of commodity exports increased by
roughly 54.1% for the same period, as a result of a 63.3% increase
in the value of (Brent) oil prices. Additionally, the value of commodity
imports increased by 12.2% for the same period, due to higher
prices for mineral products, transport equipment, chemical industry
products, food products, and beverages. The increase in the value
of commodity exports resulted in a surplus in the trade balance of
228.0% from the beginning of 2021 until September.

Foreign Direct Investment

The Kingdom was able to return to the pre-pandemic levels of
Foreign Direct Investment (FDI). This was, in part, due to implementing

BUDGET STATEMENT Fiscal Year 2022 21

economic reforms and new regulations, most notably reducing the
required timeframe to establish businesses to 30 minutes from
15 days, as well as enabling foreign investors to access the Saudi
financial market directly through the “ Qualified Foreign Investor
Program” (QFI), which is provided by Tadawul as part of its programs
to develop the financial sector in Saudi Arabia.
The data indicates that FDI flows have increased to SAR 58.6 bn
in H1 2021 compared to approximately SAR 9.1 bn during the same
period last year, a rise of more than 5 times. According to SAMA data,
the net FDI flows into Saudi Arabia during H1 2021 are the highest
ever recorded.
In October, the National Investment Strategy (NIS), a key element
and enabler in the Saudi Vision 2030, was launched, with a target to
increase net FDI flows to SAR 388 bn annually by 2030.

The Financial Sector

According to the latest quarterly data released by the Saudi
Exchanges (Tadawul), the Tadawul All Share Index (TASI) increased
by 38.5% by the end of Q3 FY 2021, where the index closed at 11,495
points, up by 3,196 points compared to the previous year. The total
volume traded has increased by 4.7% from 52.5 bn shares by the
end of Q3 FY 2020 to 54.9 bn shares by the end of Q3 FY 2021.
The total number of transactions has increased by 50.3% to 70.9
million transactions during Q3 FY 2021, compared to 47.1 million
transactions for the same period last year.
The data also indicate that the market value of outstanding shares
increased significantly to SAR 10 trillion by the end of the Q3 FY
2021, a growth of 10.3% compared to the same period last year. The
total value of traded shares increased by 31.9% compared to the
same period last year, reaching nearly SAR 1.7 trillion.

BUDGET STATEMENT Fiscal Year 2022 22

 The chart below shows the quarterly growth rates of the total
equity market capitalization since the beginning of 2020:

Market Capitalization
SAR bn

15% 12,000
11%
9%
10% 10,000
6%
5% 4%
8,000
0%
-0.3% 1%
6,000
-5%
4,000
-10%

-15% 2,000
-16%
-20% 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3

2020 2021
Market Value Quarterly Growth Rate

Source: Saudi Exchange (Tadawul)

The chart shows a significant increase in foreign ownership by

the end of Q3 FY 2021, amounting to 14.5% compared to about 12.5%
in the same period last year. This increase came as the percentage
of Saudi ownership decreased, while Gulf citizens’ ownership rates
remained unchanged.

Ownership as % by Nationality

14.48%

2.16%

83.36%

Foreign GCC Saudi

Source: Saudi Exchange (Tadawul)

BUDGET STATEMENT Fiscal Year 2022 23

Key Growth Drivers in FY 2022
• Economic and fiscal reforms have played an important role in
strengthening the Kingdom’s ability to address the COVID-19
pandemic crisis with a well-developed digital infrastructure that
proved capable of facing the crisis and decisive health measures
during the pandemic. This formed the cornerstone of containing
the pandemic at a swift pace, faster than expected. This progress
yielded an increase in the immunization rates and a decline
in the number of COVID-19 cases in various regions. This led
to the decision to ease health precautions starting on Sunday,
17 October, 2021, by opening the full capacity of the Two Holly
Mosques and eliminating social distancing restrictions in public
places, transportation means, restaurants, cinemas and so on.
• In light of these domestic developments and the gradual recovery
of the global economy, the Kingdom’s economic growth rates
for the FY 2022 and the medium-term have been revised, with
expectations indicating that the private sector’s growth will
accelerate to lead the economic growth in the medium-term. This
will be propped up by government efforts to strengthen the role
of the private sector and support the growth of the small and
medium enterprises (SMEs), alongside the role of government
spending in achieving structural transformations that support
long-term growth. Preliminary estimates for FY 2022 indicate
that real GDP is expected to grow by 7.4%, driven by a rise in oil
GDP. This is in addition to the expected improvement in non-oil
GDP assuming that the economy continues to recover gradually
from the effects of the COVID-19 pandemic.

BUDGET STATEMENT Fiscal Year 2022 24

• This comes in addition to the positive role of the NIS, which will
contribute to supporting the growth and diversification of the
national economy, as one of the most important targets of Saudi
Vision 2030. The strategy will help raise the private sector’s
contribution to GDP to 65%, promote investment by empowering
investors, develop new investment opportunities and finance
solutions to increase the contribution of FDI to 5.7% of GDP,
increase the percentage of non-oil exports from 16% to 50% of
non-oil GDP, and decrease the unemployment rate to 7%. This
comes in addition to developing the business and investment
environment in partnership with the private sector by launching
project offices to develop areas where there are no development
authorities, including al-Baha, Al-Jouf and Jazan, with the
aim of maximizing the benefit of the relative and competitive
advantages of each region and achieving inclusiveness with
regional development.
• The NDF also plays an important role in raising the performance
of the other development funds and banks to serve development
priorities and economic needs in coordination with the private
sector. This comes along with the stimulation of investment
under the umbrella of the “Shareek” Program, an essential part
of the NIS, which aims to build a cooperative framework between
the government sector and private sector companies to achieve
investment objectives that will inject around SAR 5 trillion in new
investments by 2030.
• Efforts to promote tourism and attract tourists from around the
world are also expected to play an important role in increasing
economic growth. Several Saudi Seasons were launched in Q4
2021, including the Riyadh Season, Al-Diriyah Season and AlUla

BUDGET STATEMENT Fiscal Year 2022 25

 Moments Season, and they will continue until Q1 of next year.
These seasons enrich the lives of citizens; raise the quality of life
of the residents of the Kingdom; diversify the national economy
by promoting different destinations and highlighting historical,
heritage, cultural, and natural treasures; provide jobs for Saudis;
and support investment in the tourism sector by providing
attractive investment opportunities that will put the Kingdom on
the global tourism map.
• The PIF has also launched the RIG, the world’s first tourism
destination that draws inspiration for its concept from offshore oil
platforms, and the fund’s latest tourism and leisure project. This
joins a portfolio of several projects and companies such as the
Red Sea Development Company, Soudah Development, and Cruise
Saudi, which aim to enable innovation in the tourism and leisure
sectors within the Kingdom.
• In addition, increasing oil production and raising the Kingdom’s
production share that started in May 2021 in accordance with
the OPEC+ agreement, and the return of global demand as global
supply chains improve, will have a positive impact on the Kingdom’s
trade balance.
Key Economic Indicators Estimates in the Medium-term
(Percentage, unless otherwise stated)

Actual* Estimates** Projections**

2020 2021 2022 2023 2024

Economic Indicators

Real GDP growth -4.1% 2.9% 7.4% 3.5% 4.0%

Nominal GDP (SAR bn) 2,625 3,207 3,615 3,479 3,697

Inflation 3.4% 3.3% 1.3% 2.0% 2.0%

*Source: GASTAT
** Source: MOF “Preliminary”

BUDGET STATEMENT Fiscal Year 2022 26

02
Fiscal Developments and Outlook
for FY 2022 and the Medium-Term
A. Fiscal Developments in FY 2021
(SAR bn, unless otherwise stated)

Actual Budget Estimates Annual Change

(Actual 2020-
2020 2021 2021 Estimates 2021)*

Revenues
Total Revenues 782 849 930 19.0%
Taxes 226 257 295 30.2%
Taxes on Income, Profits, and Capital Gains 18 13 17 -7.9%
Taxes on Goods and Services 163 209 232 41.8%
Taxes on International Trade and Transactions 18 17 17 -3.1%
Other Taxes 27 18 29 7.7%
Other revenues 555 592 636 14.4%

Expenditures
Total Expenditures 1,076 990 1,015 -5.6%
Expenses (OPEX) 921 889 903 -1.9%
Compensation of Employees 495 491 497 0.4%
Use of Goods and Services 203 192 199 -2.2%
Financing Expenses 24 37 29 18.5%
Subsidies 28 22 23 -18.0%
Grants 4 0.4 5 2.8%
Social Benefits 69 63 67 -3.2%
Other Expenses 97 83 85 -12.6%
Non-Financial Assets (CAPEX) 155 101 112 -27.7%

Budget Deficit
Budget Deficit -294 -141 -85 -

As Percent of GDP -11.2% -4.9% -2.7%

Debt and Assets

Debt 854 937 938 -
As Percent of GDP 32.5% 32.7% 29.2%
Government Reserves at SAMA 359 280 350 -
Source: MOF
* Annual change percentages are based on all total values
Figures are rounded up to the nearest decimal point

BUDGET STATEMENT Fiscal Year 2022 28

Revenues
Revenues have been positively affected by several factors during
the current fiscal year, most important of them has been the gradual
recovery in most economic activities as the pandemic was fading,
in addition to the positive impact of the Government’s initiatives
and reforms that support the private sector. Revenues were also
boosted by the implementation of non-oil initiatives that the Kingdom
has implemented to ensure fiscal sustainability. Moreover, the
developments in the oil markets as a result of the growth in global
demand have had an impact on the rebound in oil prices to exceed
$80 per barrel, bringing the average prices to about $69.5 per barrel
since the beginning of the year until October 2021.
Considering the aforementioned developments, total revenues in
FY 2021 are expected to reach SAR 930 bn, up 19% from FY 2020,
due to the expected increase in oil revenues, and an 18.2% increase
in non-oil revenues compared to FY 2020, after excluding exceptional
profits from government investments collected last year. It is worth
noting that non-oil revenues are expected to rise in 2021 by 10.1%
compared to the approved budget.

Taxes
Tax revenues for FY 2021 are expected to reach SAR 295 bn, up
30.2% compared to FY 2020, on the back of the improvement in
the economic performance in addition to the annual impact of the
initiatives that were implemented since last year.
Taxes on income, profits, and capital gains are expected to record
SAR 17 bn, down 7.9% from the previous year, since this year’s
revenue is tied to the activity of businesses that have been impacted
by the pandemic in the previous year. Moreover, the decline therein

BUDGET STATEMENT Fiscal Year 2022 29

is also associated with the base effect from the collection of non-
recurrent revenues from previous years of around SAR 4.3 bn.
Taxes on goods and services are expected to reach about SAR
232 bn in FY 2021, up by 41.8% compared to the previous year,
mainly due to the realization of the full annual impact of raising the
VAT rate to 15% starting from July 2020, in addition to the marked
improvement in consumption indicators this year after the easing of
the precautionary measures.
Taxes on international trade and transactions (customs duties)
are expected to record approximately SAR 17 bn by the end of FY
2021, a slight decrease of 3.1% compared to the previous year as a
result of the lifting of the protection fee on wheat imports.
Other tax revenues (including Zakat) are expected to reach SAR
29 bn in FY 2021, an increase of 7.7% compared to the previous year
and by 17.1% when excluding the impact of non-recurrent revenues
in both years. This increase is attributed to the improvement in
collection processes and the taxpayer compliance.

Oil and Non-Oil Revenues

1400
1,247
1200 1,153
1,118
1,040
1000 906 927 930

782
800 741 770
SAR bn

692
1,145 613
1,035 594
558
600 1,034 913 519 611 413

436
400 670
446
334

200 372
332 369
256 294
166 186
102 118 127
71 83
0
Estimates
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2021
Oil Revenue Non-oil Revenue

Source: MOF

BUDGET STATEMENT Fiscal Year 2022 30

Other Revenue
Other revenues (including oil revenues, profits from government
investments, sales of goods and services, and fines) for FY 2021 are
expected to record SAR 636 bn, with an increase of 14.4% compared
to the previous year, mainly due to an expected increase of 35.2%
in oil revenues compared to the previous year to reach around SAR
558 bn in FY 2021.
It is worth noting that other non-oil revenues are expected to
decline by 45.8% in FY 2021 compared to the previous year, mainly due
to the collection of exceptional profits from government investments
last year.

Expenditures
Total expenditures for FY 2021 are expected to reach SAR 1,015
bn, down 5.6% from the actual expenditure in FY 2020 and 2.6% higher
than the approved budget. Although expected total expenditures for
this fiscal year are higher than the approved budget, they reduced
by 4.2% compared to FY 2019, reflecting the Government’s efforts
to increase spending efficiency. The increase in total expenditures
compared to the budget for this current fiscal year, FY 2021, is due to
several key factors, the most important of which is the expenditure
associated with “COVID-19”. This includes overtime compensation to
some workers in the health sector to expedite the immunization of
citizens and residents of the Kingdom; the expenditures to purchase
the vaccines and expanding the vaccine coverage to younger age
groups (and therefore numbers) than previously planned; the
increase in zakat revenues and, thus, the social benefits spending
associated with them; as well as an increase in external support
to countries and international organizations, which reflects the
Kingdom’s pivotal role in supporting the global economy and to

BUDGET STATEMENT Fiscal Year 2022 31

achieve the Kingdom’s interests as well; and the increase in capital
expenditures (CAPEX) to accelerate the execution of some projects.
When compared to the actual expenditure for FY 2020, operational
expenditures (OPEX) are expected to reach SAR 903 bn by the end of
FY 2021, a decrease of 1.9%. This is a result of a 12.6% reduction in
other expenses and a 2.2% reduction in expenditures on goods and
services, due to lower pandemic-related spending compared to the
exceptional spending on COVID-19 last year. In addition, grants are
expected to increase by 2.8%, while financing costs are expected to
increase by about 18.5% as a result of the increase in government
debt. Employee compensations are expected to increase by 0.4%
due to overtime compensations in the health sector, in addition to
non-recurrent amounts that were disbursed during the current year,
FY 2021, to the General Organization for Social Insurance (GOSI).
CAPEX is expected to reach SAR 112 bn, 27.7% lower than the
actual expenditures for FY 2020. This is the result of progress the
Government made in improving infrastructure and providing the
private sector and the development funds with the opportunity
to lead investment projects. This is also due to the completion of
several projects to construct water plants, networks, reservoirs,
and sanitation facilities; several projects to develop and construct
infrastructure and essential equipment for industrial cities; some
rehabilitation projects; in addition to the construction of several
roads and public spaces.

Sectoral Performance
On the back of the factors above, spending on the Infrastructure
and Transportation, the General Items, and the Security and Regional
Administration sectors is expected to decrease by about 19.9%,
16.1% and 13.8%, respectively, compared to FY 2020. Spending

BUDGET STATEMENT Fiscal Year 2022 32

 on the military sector is also expected to decrease by 6.7%, while
spending on the economic resources and municipal services sectors
is expected to increase by 32.9% and 5.3%, respectively, compared
to the previous fiscal year, FY 2020.

Sectoral Expenditure
(SAR bn, unless otherwise stated)
Annual
Actual Budget Estimates Change*
Sector
2020 2021 2021 (Actual 2020 -
Estimate 2021)*

Public Administration 36 34 33 -7.9%

Military 204 175 190 -6.7%

Security and Regional Administration 115 101 99 -13.8%

Municipal Services 47 51 50 5.3%

Education 205 186 191 -6.8%

Health and Social Development 190 175 191 0.2%

Economic Resources 61 72 82 32.9%

Infrastructure and Transportation 60 46 48 -19.9%

General Items 156 151 131 -16.1%

Total 1,076 990 1,015 -5.6%

Source: MOF
* Annual change percentages are based on all total values
Percentages are rounded up to the nearest decimal point

BUDGET STATEMENT Fiscal Year 2022 33

 Deficit and Debt
In light of the aforementioned revenues and expenditures, the
budget is expected to record a deficit of approximately SAR 85 bn
(2.7% of GDP) by the end of FY 2021, compared to SAR 294 bn (11.2%
of GDP) in FY 2020.
Budget Balance as % of GDP
400 15%

300
10%
200
5%
100

0 0%

100-
SAR bn

-5%

200-
-10%
300-

-15%
400-

500- -20%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Estimates
SAR bn % of GDP
Source: MOF

Total debt issuances for FY 2021 reached around SAR 125 bn,
(taking into account repayment of principal of SAR 40 bn), of which
61% are domestic issuances and 39% are international issuances.
Thus, domestic debt comprises 60% of the total outstanding debt,
while external debt is 40%.
It is worth noting the increasing demand for the Kingdom’s
sovereign issuances by investors, as the Government was able,
under its Sukuk and Global Medium-term Note Issuance (GMTN)
Programs, to complete its first international issuance during FY 2021
with a USD-denominated bonds, which had a total value of USD 5 bn
and was 4 times oversubscribed. The Government also completed
its second international note issuance in Euro for a total value of
EUR 1.5 bn and was oversubscribed by more than 3 times, while the

BUDGET STATEMENT Fiscal Year 2022 34

3-year tranche achieved a negative yield. Moreover, the Government
completed its third international sukuk and bond issuance, which
had a total value of USD 3.25 bn and was 3.5 times oversubscribed.

Borrwoing for FY 2021

(SAR bn)

Total Issuances External Isuuances Local Issuances

%15
%61 %23

%100
125 49 75
%39 %62

Local External Bonds Sukuk Sukuk

Export Credit Agencies

Source: NDMC

Thus, debt is expected to reach SAR 938 bn (29.2% of GDP) at

the end of FY 2021, compared to SAR 854 bn (32.5% of GDP) a year
earlier. Despite the increase in the debt portfolio, debt-to-GDP ratio
is expected to decrease. This is due to the debt levels increasing at a
rate lower than the estimated increase in GDP.
It is estimated that government reserves at SAMA will decrease
by the end of FY 2021 by approximately SAR 9 bn compared to the
balance at the end of previous year. This amount will be used to
cover the residual financing needs that were not covered by debt
issuances, which are mainly the financing of the private sector
stimulus packages. Thus, the stock of reserves is estimated to reach
SAR 350 bn by the end of FY 2021, higher than the budget target of
SAR 280 bn, due to the expected decline in the budget deficit.

BUDGET STATEMENT Fiscal Year 2022 35

B. FY 2022 Budget and Medium-term Projections

FY 2022 Budget Estimates

(SAR bn, unless otherwise stated)

Budget Estimates Budget

2021 2021 2022

Revenues
Total Revenues 849 930 1,045
Taxes 257 295 283
Taxes on Income, Profits, and Capital Gains 13 17 16
Taxes on Goods and Services 209 232 223
Taxes on International Trade and Transactions 17 17 18
Other Taxes 18 29 26
Other Revenues 592 636 763

Expenditures
Total Expenditures 990 1,015 955
Expenses (OPEX) 889 903 863
Compensation of Employees 491 497 498
Use of Goods and Services 192 199 160
Financing Expenses 37 29 33
Subsidies 22 23 24
Grants 0.4 5 2
Social Benefits 63 67 63
Other Expenses 83 85 83
Non-Financial Assets (CAPEX) 101 112 92

Budget Deficit / Surplus

Budget Deficit / Surplus* 141- -85 90
As percent to GDP -4.9% -2.7% 2.5%
Debt and Assets
Debt 937 938 938
As percent to GDP 32.7% 29.2% 25.9%
Government Reserves at SAMA 280 350 381
Source: MOF
* Surpluses that are achieved in the budget will be directed according to the FSP mechanism for handling surpluses,
for the purpose of boosting government reserves and supporting the development funds and the PIF
Percentages are rounded up to the nearest decimal point

BUDGET STATEMENT Fiscal Year 2022 36

Revenue
In FY 2022, the Government expects the continuation of the gradual
recovery in economic activity while maintaining the initiatives
implemented over the past years, as the revenues in the budget
reflect the realization of the full impact of all implemented fiscal
initiatives. It is worth noting that the negative growth rates of some
items also show non-recurrent revenues this year, FY 2021. Lastly,
the estimates include the impact of the continued development in
tax administration and the improved collections, which contributed
to increased compliance by taxpayers. In the medium-term, the
Government aims to continue to reduce the primary dependence on oil
revenues, and to achieve the objectives of Vision 2030 by diversifying
the economy, developing and enhancing non-oil revenues, and
ensuring their sustainability in the medium-and long-term.
Estimates indicate that total revenues in FY 2022 will reach around
SAR 1,045 bn, an increase of 12.4% compared to the estimated
revenues in FY 2021.
Taxes
Tax revenues in FY 2022 are estimated to reach around SAR 283
bn, declining by 4.1% compared to what is estimated to be collected
in FY 2021.
It is estimated that taxes on income, profits and capital gains will
reach around SAR 16 bn in FY 2022, a decrease of 6.0% compared
to the expected collections in FY 2021, as a result of the initiative of
the Zakat, Tax and Customs Authority (ZATCA) to lift fines and exempt
financial penalties during FY 2021, which encouraged taxpayers to
make settlements of past dues.
Regarding taxes on goods and services, they are estimated to reach
nearly SAR 223 bn in FY 2022, a decrease of 3.5% from the collection

BUDGET STATEMENT Fiscal Year 2022 37

expected in FY 2021, which is attributed to the impact of the initiative
to amend the due date of the VAT collection on the enterprises’ supply
that are contracting with government entities. Under this initiative,
the tax will be due on the date of issuing the payment order for the
supply subject to tax according to the competitiveness law or the date
of full or partial receipt of the consideration and to the extent of the
received amount, whichever comes first. This was enforced starting
from November 2021. The fiscal impact of this initiative affects cash
flows of the first year of implementation.
Taxes on international trade and transactions are expected to
reach around SAR 18 bn for FY 2022, up 3.4% from the expected
revenue in FY 2021, driven by the continued import growth next year.
It is also estimated that other taxes (including zakat) will record
approximately SAR 26 bn in FY 2022, a decrease of 11.9% compared
to the expected revenue in FY 2021, due to the collection of non-
recurrent dues from previous years during FY 2021.
Other Revenues
Other revenues, which include oil revenue, returns on government
investments, sales of goods and services, as well as sanctions and
fines, are estimated to reach roughly SAR 763 bn for FY 2022, an
increase of 20% compared to expected revenue in FY 2021. It should
be noted that these estimates do not assume the collection of any
exceptional profits from government investments during FY 2022.
Expenditure
The budget for FY 2022 reflects the Government’s continued efforts
to implement reforms that support developing the management
of public finance, concurrently with achieving fiscal discipline and
enhancing spending efficiency to maintain the previously announced

BUDGET STATEMENT Fiscal Year 2022 38

spending ceilings. Total expenditure is estimated at around SAR 955
bn for FY 2022.
Accordingly, it is estimated that OPEX will reach SAR 863 bn in FY
2022, approximately 4.4% lower than expected spending in FY 2021.
Employee compensations are estimated at SAR 498 bn, slightly up
by around 0.3% compared to the FY 2021 estimates. Spending on
goods and services is expected to reach approximately SAR 160 bn,
a decline of 19.4% compared to the FY 2021 estimates, as a result
of the gradual recovery from the impacts of the pandemic, thus
excluding the exceptional spending for FY 2021. This is in addition to
the role of the Expenditure and Projects Efficiency Authority (EXPRO)
in enabling government entities to adopt the best practices to realize
spending efficiency and supporting these entities with the necessary
incentives to achieve the objectives. Financing costs in the FY 2022
are estimated at around SAR 33 bn, an increase of 12.4% compared
to the estimates in the FY 2021. This is a result of reflecting a portion
of the cost of the financing made during the FY 2021 and the financing
transactions that are expected in the FY 2022.
Progress has been made in the implementation of the VRPs, the
mega projects, as well as investment projects in various sectors,
including high-level investment in infrastructure in the past period.
Thus, it is estimated that capital expenditures will decline by 18.2%
compared to the FY 2021 estimates, to reach approximately SAR
92 bn, due to the conclusion of several capital projects and the
involvement of the private sector and the PIF in financing a number
of capital projects. On the other hand, the Government plans to
continue to implement several projects in all sectors, including
infrastructure projects, residential cities, highway projects, housing
unit construction and water plants.

BUDGET STATEMENT Fiscal Year 2022 39

Budget Surplus and Debt
A Budget surplus is estimated to be achieved in FY 2022 of
around SAR 90 bn (2.5% of GDP). This surplus will be directed to
boost government reserves, support development funds and the
PIF to consider the possibility of accelerating the implementation
of selective strategic programs and projects with economic and
social dimensions, and partially repay the debt based on market
conditions. This is meant to enhance the capability to withstand
crises by solidifying the Government’s fiscal position and focusing
on investment that achieves sustainable economic growth in
manner that ensures maintaining the stability and sustainability of
the Govenment’s fiscal position.
Budget Balance
2.5% 5%
100

- 0%

(100) -2.7%
-5%

(200)
-10%
SAR bn

(300)

-15%
(400)

-20%
(500)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Actual Estimates Projections

SAR bn % of GDP

Source: MOF

In order to meet estimated budget financing needs of FY 2022, the

MOF is coordinating with the NDMC to prepare an annual borrowing
plan aimed at continuing the diversification between domestic and
external sources of financing. This will enhance the Kingdom’s ability

BUDGET STATEMENT Fiscal Year 2022 40

to access various local and international markets, while ensuring
the issuance of sovereign debt instruments at fair price and within
well-considered risk management frameworks and principles that
account for several factors such as maintaining domestic market
liquidity, preserving the average target maturity to minimize future
refinancing risks, in addition to making early refinancing processes
for principal repayment that comes due in the coming years, and
focusing on debt issuances with fixed rates to reduce exposure to
interest rate risk, as well as limiting exchange rate risk.
The medium-term debt strategy also aims to seize financing
opportunities and continue to diversify financing instruments
between bonds, sukuk and loans, while continuing to diversify
investor base, work on aligning the financing processes
of sustainable issuances and searching for new financing
methodologies such as alternative government financing, which
is a modern financial tool that includes three forms of financing:
project financing, infrastructure financing, and financing from Export
Credit Agency (ECA). This is part of the MOF’s strategy to support
the continuation and completion of mega projects in the Kingdom
and to continue to deepen the domestic debt market, within the
framework of the Government’s efforts to enhance the domestic
market infrastructure.
Debt in FY 2022 is estimated to be close to FY 2021 levels,
which represents around 25.9% of GDP, as a result of the projected
surpluses in the budget. The repayment of principal that will be
due in the future is to be repaid through annual issuances, with the
possibility of considering an early repurchase of a portion of existing
debt based on market conditions. It is worth noting that the debt-to-
GDP ratio is expected to decrease in the FY 2024 to reach 25.4%, as
a result of the projections of GDP growth.

BUDGET STATEMENT Fiscal Year 2022 41

Medium-term Fiscal Projections
(SAR bn, unless otherwise stated)

Actual Budget Estimates Budget Projections

2020 2021 2021 2022 2023 2024

Total Revenues 782 849 930 1,045 968 992

Total Expenditures 1,076 990 1,015 955 941 951

Budget Deficit / Surplus -294 -141 -85 90 27 42

Percent of GDP -11.2% -4.9% -2.7% 2.5% 0.8% 1.1%

Debt 854 937 938 938 938 938

Percent of GDP 32.5% 32.7% 29.2% 25.9% 26.9% 25.4%

Source: MOF
Figures are rounded up to the nearest decimal point

It is worth noting that revenue estimates for FY 2023 and 2024 are
based on a conservative methodology as per the fiscal rules in the
FSP, and not on future estimate of revenues.

BUDGET STATEMENT Fiscal Year 2022 42

C. Revenue Scenarios
based on Global Economic Developments
Oil markets witnessed an improvement due to the recovery of
the global economy, the return of industrial activity, and the gradual
recovery in transportation. This resulted in an increase in the demand
on all energy sources. The OPEC+ continued to increase production
in response to the improvement in global demand for oil and to
balance the markets. This economic recovery was accompanied by
a crisis in the supplies of natural gas and coal needed to produce
electricity, along with an increase in their prices. This affected the
energy markets generally.
The estimates of most financial think tanks and institutions
indicate the continuation of the pace of economic recovery for FY
2022, assuming an increase in the numbers of vaccinated individuals
against COVID-19, easing of imposed restrictions worldwide, growth
in economic activities during the next year to levels that approach
their pre-pandemic levels supported by an increase in consumption
levels of services and goods. Moreover, these sources project that oil
demand will continue to grow during FY 2022 until it reaches its pre-
pandemic levels, with prices ranging, next year, between USD 65 per
barrel and 90 per barrel.
On the other hand, uncertainty regarding the recovery and opening
of the global economy persists for many reasons, among which are:
the reoccurrence of complete and partial shutdowns in a number
of key economies, the persistence of the pandemic’s repercussions
for a longer period of time due to the new waves of COVID-19. This
is in addition to the persistence of global supply chain challenges,
the pressures resulting from the increase in inflation levels, and the

BUDGET STATEMENT Fiscal Year 2022 43

expectations of an increase in oil reserves, which exerts even more
pressure on the oil markets.
In light of these considerations, the following revenue scenarios
were prepared for FY 2022 as follows:
1. The Structural Revenues Scenario2, which is not tied to the
developments in global markets. This is the scenario that was
the basis upon which the expenditure ceilings in the budget
was determined in accordance with the FSP.
2. The Baseline Scenario that is based on the developments
in global markets. This is the scenario used to estimate the
revenues in the budget.
3. A scenario that takes into consideration the achievement of
lower revenues compared to the Baseline Scenario.
4. A scenario that takes into consideration the achievement of
higher revenues compared to the Baseline Scenario.
Revenue Scenarios for FY 2022
based on Global Economic Developments
)SAR bn(
1,130
1,045
991
955 955 955 955
903

90 175
36

-52
Structural Budget Scenario Lowest Revenues Highest Revenues
Revenues Scenario Scenario Scenario

Revenues Expenditures Budget Deficit/ Surplus

The fiscal rulesFiscal

uponYear
which
2022 the structural revenues were based are detailed in chapter 3, 44
2
BUDGET STATEMENT
in the content on the Fiscal Sustainability Program
 It is essential to reiterate that the expenditure ceiling for FY 2022
were prepared on the basis of structural revenues that do not take
into consideration the future projections of global markets. Thus, the
ceiling was maintained according to the medium-term expenditures
planning, which was previously announced in the medium-term
expenditure ceilings estimates that were published in last year’s
Budget Statement and were emphasized and confirmed in FY 2022
Pre-Budget Statement. This aims to achieve the national objectives
and build expenditure ceilings that are more stable through limiting
procyclical spending, which is influenced by the volatility in oil prices,
tying expenditure to structural revenues, and establishing quantitative
controls for the size of the annual growth of expenditure ceilings.

BUDGET STATEMENT Fiscal Year 2022 45

D. Expenditures by Sector in the Budget for FY 2022
Below is a list of the most notable programs and projects to
which expenditures will be directed in each sector, whether for the
purposes of completing ongoing efforts or starting new programs
and projects:
Infrastructure and Transportation Sector
First: Overview

Sector Allocation
SAR 42 bn
in FY2022 Budget

Roads, ports, airports, housing, communications

and information technology, data and artificial
Sector Mandate
intelligence, postal services, space, and industrial
cities such as Jubail, Yanbu, Ras Alkair, and Jazan

Number of Government
17
Bodies Serving the Sector

Second: Key Projects Achievements in FY 2021

Scope Achievement
4 Saudi airports ranking among the best 100 airports
in the world according to the Skytrax ratings. One of the
Aviation 4 airports ranked 50th on the list, thereby enhancing
the Kingdom’s image and improving the experience of
travelers
In a first, the Kingdom has featured on the list of the top
10 ports globally, ranking 5th among the fastest countries
in the world in the handling of container ships at an
Ports
average of 16.8 hours, an achievement that enhances
the Kingdom’s status as a premier location for logistic
services.
Enabling more than 210 thousand Saudi families to
benefit from the diverse options offered by the “Sakani”
Program, with 166 thousand families moving in their
Housing
homes as of the end of November this year after having
benefited from the subsidized mortgage loans that are
provided in partnership with 18 financing entities

BUDGET STATEMENT Fiscal Year 2022 46

 Scope Achievement

Ranking second among the G20 member states in digital

competitiveness on the Digital Riser rankings. Riyadh
Communications
rising to 3rd place among the cities of the world in mobile
internet speeds via 5G technology
The launch of the “Ehsan” platform to promote and
strengthen the values of giving to all members of society.
Data and Artificial The value of donations through the platform reached
Intelligence more than SAR 1 bn, with the contributions coming from
15.6 million donors and reaching more than 2.7 million
beneficiaries

Third: Key Projects Planned for FY 2022

Scope Objective

Establishing the National Center for Transportation

Transportation Safety, and launching the “Rental Contracts” service
through the Naql Portal

Facilitating housing units for more than 130 thousand

Housing beneficiaries, and the signing of over 100 thousand
housing support contracts

Establishing a special economic zone that contributes

to attract local and global investments with the aim of
attracting more than 10 global companies in the coming
years
Communications
Launching the smart home market stimulation and
development program, and enabling mage projects and
real estate companies from investing in smart homes in
partnership with the Quality-of-Life Program

Launching the SDAIA Academy to offer courses on

the fundamentals of data and artificial intelligence, in
Data and Artificial addition to launching the businesses incentives program,
Intelligence one of the initiatives under the policy and regulations
track in the National Strategy for Data and Artificial
Intelligence (NSDAI)

BUDGET STATEMENT Fiscal Year 2022 47

Education Sector
First: Overview

Sector Allocation
SAR 185 bn
in FY2022 Budget

Schools, colleges, and university cities; managing

external scholarship programs of the Custodian
Sector Mandate of the two Holy Mosques; support of research,
development and innovation; university hospitals.
and supporting knowledge sources

Number of Government
35
Bodies Serving the Sector

Second: Key Projects Achievements in FY 2021

Scope Achievement

Increasing the numbers of university admissions to over

10% of the seats allocated for citizens, both males and
females.

Allocating 60 educational facilities in the Province of

Makkah (the first phase), and saving around SAR 1.3 bn
of the capital cost to reinvest it into the operation

Launching the Excellence Scholarship Path for 32 new

majors in 70 international universities
Education
Expanding the King Khalid University Hospital by adding
472 beds, 22 examination rooms, 32 operation rooms,
an oncology center, a rehabilitation center, an endoscopy
unit, and medical imaging and radiology services

Establishing a university center for oncology at the

King Saud University by adding 11 examination rooms,
30 chemotherapy units, and equipment for oncology
treatments and nuclear examination

BUDGET STATEMENT Fiscal Year 2022 48

 Third: Key Projects Planned for FY 2022

Scope Objective

Launching the "Industrial Apprenticeship" Program by

increasing trainee enrollment percentage from 18%
to 40%, and increasing the percentage of the practical
training days from 55% to 60% for the graduates of the
technical colleges and from 15% to 70% for university
programs

Establishing talent and innovation clubs for trainees,

male and female, in colleges and institutes

Providing solutions to the national and industrial

challenges through scientific research, by targeting the
Education
establishment of 50 partnerships with the private sector,
particularly the industrial sector, and national bodies

Launching an initiative to support university researchers

in developing technical innovations through taking their
research from the prototype development phase and
transforming them into industrial products

The inclusion of the Chinses Language into the secondary

school stage in 746 schools across 47 education
administrations in the Kingdom

BUDGET STATEMENT Fiscal Year 2022 49

Municipal Services Sector
First: Overview
Sector Allocation
SAR 50 bn
in FY2022 Budget
Infrastructure of cities, developing Saudi cities,
Sector Mandate
increasing the quality of life within cities
Number of Government
295
Bodies Serving the Sector
Second: Key Projects Achievements in FY 2021

Scope Achievement

The completion of the development of 88 services within

the unified platform for municipal services "Balady"
Launching the "Qarar" Platform to engage the community
in the discussion of laws and regulations before enacting
them, starting with 30 regulations
Municipal
Services Developing municipal investment through the municipal
investment portal "Furas", where the number of posted
opportunities exceeded 15 thousand
Launching the visual defacement treatment processes
chamber to detect violations and process more than 150
thousand violation reports
Third: Key Projects Planned for FY 2022

Scope Objective
Operating the National Platform for Urban Monitoring to
measure more than 130 urban indicators to serve more
than 17 urban sectors
Launching the Spatial Management System to determine
the need for the provided city-level services
Municipal Activating the launch of the specialized professions
Services licenses to enhance productivity and stop the flow of
unqualified workers into the market
Launching the Spatial Detection System for Visual
Defacement Violations to pinpoint the time and place of
the violations and link them to the geographical scope
of the operation and maintenance contracts of all the
service-providing companies in cities

BUDGET STATEMENT Fiscal Year 2022 50

Health and Social Development Sector
First: Overview

Sector Allocation
SAR 138 bn
in FY2022 Budget

Health development including health and ambulatory

care, legislations, and research. Social Development
Sector Mandate including security and protection services, in addition
to cultural, media, sport, and entertainment services
and the Quality-of-Life Program
Number of
Government Bodies 22
Serving the Sector
Second: Key Projects Achievements in FY 2021

Scope Achievement

The inauguration of 10 hospitals to bring hospital

capacity to over 1,500 beds throughout the regions of the
Kingdom, and the opening of 4 laboratories specializing
in COVID-19 testing
Health

Reducing the percentage of tobacco proliferation in the

Kingdom, and the rise of the rate of smoking cessation by
26.8%

The nationalization of 20 professions and activities in a

Human
number of sectors, and the creation of over 378 thousand
Resources
job opportunities for jobseekers

Enabling more than 10 thousand social insurance

Social
beneficiaries who are capable of getting jobs in order to
Development
provide them with job opportunities

Launching the "Abde'a" Platform for issuing cultural

Culture clearances and licenses for Saudi and resident
practitioners and creatives

BUDGET STATEMENT Fiscal Year 2022 51

 Third: Key Projects Planned for FY 2022

Scope Objective

Developing government health centers for mega

consultancy centers that include all medical specialties,
as well as building and equipping specialized,
Health
comprehensive mega centers that are geographically
distributed to increase patient visits and satisfaction with
the health services that are provided

Training and qualifying 3,000 jobseekers in the areas of

safety and occupational health and getting them into the
labor market

Human Managing and incentivizing the flexible work platform,

Resources and operating the freelancing and remote work programs

Transitioning to job performance management to

elevate the level of maturity and culture of performance
management in government entities

Establishing the Black Gold Museum at the King Abdullah

Petroleum Studies and Research Center, which will
contain contemporary arts and designs specializing in
Culture
the field of petroleum, and establishing the Red Sea
Museum to promote and enhance the cultural and
historical identity of the cities on the coast of the Red Sea

BUDGET STATEMENT Fiscal Year 2022 52

Economic Resources Sector
First: Overview
Sector Allocation
SAR 54 bn
in FY2022 Budget

Environmental infrastructure, water, agriculture,

water desalination, sanitation, energy sources and
mineral resources, in addition to development of
Sector Mandate
tourism, investment environment, industry, space
industry, exports, supporting SMEs, enhancing
local content, and fiscal economic planning

Number of Government
45
Bodies Serving the Sector
Second: Key Projects Achievements in FY 2021

Scope Achievement
Approving the construction and operation of 5 projects
to produce electricity from solar energy sources, which
Energy contributed to the establishment of 5 Saudi companies
The Shuaibah IPP PV Project setting a world record of the
lowest cost of electricity produced by solar energy
The number of commercial registrations for companies
Trade and establishments grew by 4% compared to last year,
FY 2020
Closing 69 investment deals worth around SAR 24 bn,
Investment
and creating 18 thousand job opportunities
Attracting international and local investments through
Water,
tendering 10 projects, with an estimated cost of SAR
Environment, and
12 bn in the areas of sanitation and water desalination,
Agriculture
transmission network, and strategic storage
Creating a connection between financiers from the
government and private sectors, and between SMEs
SMEs through the Tamweel Portal, with over 2 thousand
entities already benefiting from sums amounting to over
SAR 6 bn
Raising the readiness of 9 tourism destinations and 42
targeted locations, through the Tourism Development
Tourism
Fund (TDF), with an investment value of SAR 4.2 bn to
provide more than 15 thousand hotel keys

BUDGET STATEMENT Fiscal Year 2022 53

 Third: Key Projects Planned for FY 2022

Scope Objective

Designing the regulatory framework to regulate solar

energy for capacities greater than 2 megawatts to enable
citizens and major consumers to build renewable energy
Energy
generation stations inside their establishments and
supply the excess power to the public electricity network
and to qualify development companies

The privatization of 5 sewage treatment plants to achieve

an increase in the capacity estimated at 275 thousand
cubic meters per day; the privatization of the "Tabuk-1"
Privatization
Plant, with a total capacity of 400 thousand cubic meters
per day; and the privatization of radiology clinics in all
hospitals "phase 1" to meet 50% of the estimated demand

Developing industrial locations at the Saudi Authority for

Industry
Industrial Cities and Technology Zones (MODON) and the
and Mineral
Royal Commission for Jubail and Yanbu, and developing
Resources
the infrastructure for an area of 34.65 million m2

Issuing licenses for establishing regional headquarters

for foreign companies, launching a distinguished
Investment
program to provide preferential advantages offers and
support to major domestic and international investors

Launching the National Strategic Water Storage Program

Water,
to preserve the excess desalinated water in the aquifers
Environment, and
and dams, with a storage capacity of about 109 million
Agriculture
cubic meters per year to support water security

Preparing general and detailed plans for tourist sites, for

Tourism
15 tourist locations

Activating the unified classification system for

Government
government procurements and linking the classification
Procurement
to the systems used in the Kingdom

BUDGET STATEMENT Fiscal Year 2022 54

Public Administration Sector
First: Overview
Sector Allocation
SAR 32 bn
in FY2022 Budget
Supporting administrative and legislative bodies,
the Ministry of Foreign Affairs, courts, Islamic
Sector Mandate
affairs, human rights and care of the Two Holy
Mosques
Number of Government
32
Bodies Serving the Sector
Second: Key Projects Achievements in FY 2021

Scope Achievement

Launching the first platform for qualifying and licensing

workers to raise the efficiency and quality of the services
through providing education and training tracks in the
area of Hajj and Umrah affairs and services for more
than 8 thousand workers on the Hajj and Umrah sector
Hajj and Umrah

Launching the exceptional Hajj season for the year 1442

AH in accordance with the protective and precautionary
measures to ensure the safety of 60 thousand individuals
performing Hajj

Printing more than 6 million copies of the Holy Quran and

Islamic Affairs its translations and providing them to beneficiaries inside
and outside the Kingdom

Reducing the timeframe for processing cases and for

liquidations of troubled real estate contributions and for
inheritance liquidations through the "Infath" Center to
less than 80 days
Justice
The empowerment of women in leadership roles, and
establishing central departments operated by 100%
female staff

BUDGET STATEMENT Fiscal Year 2022 55

 Third: Key Projects Planned for FY 2022

Scope Objective

Establishing and launching a platform to raise the

awareness of the visitors of the Two Holy Mosques, to
improve the awareness regarding information pertaining
to the environment, health, security and safety to provide
a suitable environment for the visitors of the Two Holy
Hajj and Umrah Mosques and secure the sustainability of the Hajj and
Umrah sector

Improving and raising the efficiency of the services of the

subsistence system that are provided in Hajj and Umrah

Designing and launching the "Islamic Electronic Library"

application for smart devices
Islamic Affairs
Designing and launching the "Valiant Soldiers" Program
to enhance the roles of soldiers in protecting the nation's
capabilities and holy sites

Completing the establishment of the judicial services

Justice
centers to serve over 150 thousand beneficiaries

BUDGET STATEMENT Fiscal Year 2022 56

 Military Sector
First: Overview
Sector Allocation
SAR 171 bn
in FY2022 Budget
National Defense, developing military
capabilities, military cities and bases, hospitals
Sector Mandate and military medical services, military colleges,
nationalization of military industries, and military
research
Number of Government
20
Bodies Serving the Sector
Second: Key Projects Achievements in FY 2021

Scope Achievement

Establishing a public entity with the mandate of being

Fund for Martyr,
the entity responsible for the affairs of the families of the
Wounded, POW &
martyrs, wounded, POW, and missing in action; and for
Missing in Action
the affairs of their legal guardians

Armed Forces Inaugurating and operating the Cardiac Surgery and

Medical Services Illnesses Center at the Armed Forces Hospital in Jeddah

The nationalization and management of military

General Authority
procurements by qualifying 3 local manufacturers of
for Military
military uniforms, and the signing of 4 agreements for
Industries
the management of procurement processes

The electronic connectivity of medical systems, and

Ministry of the the signing of agreements for the nationalization of
National Guard – medical equipment and for the transfer of the relevant
Health Affairs knowledge. Additionally, the launch of modern specialized
health programs

BUDGET STATEMENT Fiscal Year 2022 57

 Third: Key Projects Planned for FY 2022

Scope Objective

General Authority
Improving the quality of geospatial data surveying and
for Survey and
naming the Saudi island in the Red Sea, Gulf of Aqaba,
Geospatial
the Arabian Gulf, and pertinent atlases
Information

Operating 200 beds for the Women's Health Specialized

Hospital at the King Abdulaziz Medical City in Riyadh

Ministry of the
Operating 200 beds for the Specialist Children's Hospital
National Guard –
at the King Abdulaziz City in Jeddah
Health Affairs

Operating 100 beds for neurosurgery at the King

Abdulaziz City in Jeddah

Building a complete database following the identification

Fund for Martyr,
of the numbers of beneficiaries since the year 2000 for
Wounded, POW &
all military sectors, and the technical connectivity of the
Missing in Action
database with military agencies

BUDGET STATEMENT Fiscal Year 2022 58

Security and Regional Administration Sector
First: Overview
Sector Allocation
SAR 101 bn
in FY2022 Budget
Emirates of provinces regions, internal security,
border guards, combating crime and drugs, state
security and combating terrorism and extremism,
Sector Mandate civil defense, traffic safety, reformatories and prisons
administration, passport administration, protection of
vital facilities, e-services for citizens provided by the
Civil Affairs, and cybersecurity

Number of Government
Bodies Serving the Sector
30

Second: Key Projects Achievements in FY 2021

Scope Achievement

The Kingdom ranked 2nd on the Global Cybersecurity

Index (GCI), issued by the International
Telecommunication Union (ITU). The GCI listed 193
National member states in the ITU. With this, the Kingdom ranked
Cybersecurity 1st in the Arab World, Middle East, and Asia.
Authority
Developing national personnel in cybersecurity as part
of the national training initiative “Cyber Pro” and “Cyber
Pro+”
Third: Key Projects Planned for FY 2022

Scope Objective
Ministry of
Interior Diwan, Establishing the General Directorate for the Civil Defense,
Public Security, the Border Guard, and the Public Security. Establishing
General the Special Security Forces Command. Establishing the
Directorate of Sports Training Center in Alkhobar and Arar. Residential
Civil Defense, and and medical cities projects.
Border Guard
The training program at the National Cybersecurity
National
Academy for the year 2022, with more than 3.5 thousand
Cybersecurity
training opportunities. Hosting the Global Cybersecurity
Authority
Forum in February 2022

BUDGET STATEMENT Fiscal Year 2022 59

 General Items

Total allocation to general items in FY 2022 amounted to

approximately SAR 182 bn, including government contribution to
pension funds and social insurance, debt service, balancing account
allocation, contributions to international organizations, government
programs and facilities, subsidies, contingency provision, and
general rules.

Expenditures by Sector
(SAR bn, unless otherwise stated)
Annual
Actual Estimates Budget Change*
Sector
2020 2021 2022 (Estimates 2021
- Budget 2022)

Public Administration 36 33 32 -3.3%

Military 204 190 171 -10.2%

Security and Regional Administration 115 99 101 2.2%

Municipal Services 47 50 50 -0.5%

Education 205 191 185 -3.2%

Health and Social Development 190 191 138 -27.6%

Economic Resources 61 82 54 -34.4%

Infrastructure and Transportation 60 48 42 -12.0%

General Items 156 131 182 38.7%

Total 1,076 1,015 955 -5.9%

Source: MOF
* Annual change percentages are based on all total values
Figures are rounded up to the nearest decimal point

BUDGET STATEMENT Fiscal Year 2022 60

03
Fiscal and Economic Enablers
Third:
Fiscal and Economic Enablers
The budget comes as a reflection of a comprehensive economic
policy based on three main pillars: First: Completing fiscal reforms
agenda to ensure fiscal sustainability through the diversification of
revenue sources and raising expenditure efficiency, Second: Enabling
the private sector through targeted programs designed to support its
activity and enhance its contribution to the national economy and to
projects and programs carried out by the development funds. Third:
Implementing broader structural reforms, with economic and social
dimensions, that support the first two dimensions and contribute
to enhancing the economy’s dynamism and its ability to keep pace
with the accelerating global changes. The following is a detailed
presentation of these pillars:

1. Public Finance Enablers

FBP was launched at the end of 2016, to address fiscal challenges
that pertain to fiscal pressures ensuing from elevated budget deficits
during the preceding three years. Therefore, the FBP has become
the anchor for fiscal policy, governing medium-term framework to
ensure fiscal sustainability while maintaining economic growth rates.
This is achieved through an interim goal to reduce the dependence
on oil via the development of non-oil revenues and reprioritizing and
increasing efficiency of spending.
A number of initiatives that succeeded in increasing non-oil
revenues were already implemented, increasing non-oil revenues
from around 27% of total revenues in 2015 to around 36% in 2019.
Non-oil revenues coverage of expenditures increased from 17%
to 31% in the same period. Also, previous years have witnessed
remarkable progress in raising the efficiency of spending through

BUDGET STATEMENT Fiscal Year 2022 62

developing the medium-term fiscal planning and public financial
management. Accordingly, the deviation between budgeted and
actual spending decreased from an average of around 23% during
the period (2000 - 2016) to around 3.6% during the period from 2017
to 2019.
As a result, budget deficit witnessed a marked improvement over
the past years, as deficit was gradually reduced from levels that
reached 12.8% of GDP in 2016 until it reached 4.5% of GDP in 2019.
Deficit is expected to reach 2.7% of GDP during the current fiscal
year, FY 2021, and is planned to return to surpluses in next year’s
budget, FY 2022.

The Fiscal Sustainability Program

The FBP, approved at the end of 2016, represented a medium-
term fiscal planning mechanism to maintain fiscal sustainability
and achieve a balanced budget. Since its launch, the program
has contributed to the establishment of a fiscal system and tools
capable of positively influencing and interacting with changes
and transformations at the fiscal and economic level to achieve
structural transformations that keep pace with the requirements of
the transformation phase. The program has also contributed to the
enhancement of fiscal discipline and improvement of public finance
through the establishment of several entities such as (EXPRO,
NDMC, and the Non-Oil Revenue Development Center). The program
has realized many achievements with regard to national systems
related to public finance and has also helped in containing budget
deficit ratios to GDP. This has led to strengthening the Kingdom’s
fiscal position, enhancing it to deal with external shocks, and
implementing many reforms in the budget preparation process
and raising the quality of budget execution.

BUDGET STATEMENT Fiscal Year 2022 63

 These gains and the fundamental transformation in the method
of public financial management require moving to a stage that seeks
to achieve fiscal sustainability through effective planning tools that
evoke spending requirements over a longer period of time. Helpful
in protecting this planning and the ability to perform the spending
planned in the medium-term is reducing the linkage to external
factors, including fluctuations in oil markets, so as not to cause
disruption to those plans. This is also achieved through measures
to control expenditure in a way that does not affect requirements
of projects and programs. Fiscal sustainability represents the next
stage of economic and fiscal reforms carried out through the FBP. The
FSP also seeks to complement past efforts in achieving the desired
goals by completing the work on the initiatives of the FBP, in addition
to adopting numerical determinants in the budget that are applied to
achieve the medium- and long-term goals of the fiscal policy.
The FSP has policies concerned with solving some challenges
facing public finance and establishing fiscal rules to achieve fiscal
sustainability, namely:
• Structural Revenues:
1. The shift in the mechanism of estimating oil revenues from the
future forecasts of the oil price to the adoption of conservative
estimates that are not related to oil markets expectations.
2. Supporting the sustainability of non-oil revenues and linking
their projections in the budget to non-oil GDP.
• Linking expenditures ceilings to structural revenues,
establishing quantitative controls for expenditure growth, and
stabilizing government spending according to plans by limiting
procyclical spending that is influenced by the fluctuations/
volatilities in oil prices and providing more stable spending
ceilings.

BUDGET STATEMENT Fiscal Year 2022 64

• Focusing on avoiding risks by building fiscal buffers through
setting upper and lower limits on reserves and debt ceiling as a
percentage of GDP.
• Establishing mechanisms and rules to deploy surpluses in case
they are realized.
The program is expected to realize several economic benefits
through achieving stable growth rates for the non-oil economy and
mitigating the impact of energy price fluctuations on the national
economy. For the private sector, it enhances the ability to clearly
plan investments. As for public finance, it contributes to enhancing
the effectiveness of financial planning, raising the efficiency of
government spending, and mitigating the impact of negative
economic changes on the treasury.
It is worth noting that part of the program’s objectives is to
utilize any surpluses in the budget through a mechanism to
ensures the enhancement of government reserves to strengthen
the government’s fiscal position, repayment of debt depending on
market conditions, directing amounts from the surpluses to national
funds such the PIF to enable the acceleration of the execution of
development projects, enhancing the capitals of the national funds
that support the growth and financing of private sector activities.
Fiscal estimates in the medium-term take into account the gradual
implementation of fiscal rules in the FSP.

Continuing the Enhancement

of the Public Financial Management
Within the framework of what has been explained thus far, the
Government will continue to implement reforms it started years ago to
develop public financial management, as the Kingdom’s Government
attaches great importance to enhancing the efficiency of spending

BUDGET STATEMENT Fiscal Year 2022 65

and increasing its effectiveness. This includes raising the percentage
of local content participation in government procurement, along
with raising the percentage of nationalization of jobs in the assets
and facilities management sector in the Kingdom. The Government
continues its efforts to enhance spending efficiency to achieve fiscal
savings by adopting best practices and supporting the training and
incentives necessary to achieve these objectives.
The Government is also working on developing a risk management
framework that aims to monitor local and global economic
developments, as well as to identify and evaluate associated risk. The
framework contributes to measuring the impact of identified risks
on fiscal and macroeconomic indicators using economic models and
fiscal monitoring tools. The framework also allows for the analysis
and monitoring of fiscal and economic risks at an early stage, which
allows to propose appropriate mitigation measures.
The Center for fiscal and Economic Statistics at the MOF supports
the achievement of strategic objectives by providing fiscal data, which
enables the MOF and other stakeholders to deepen the analysis of
economic sectors, improve fiscal forecasts and support research.
The center also aims to create strategic partnerships by working as a
link between MOF and government agencies, activating the program
of statistical units in government agencies under the supervision
of the GASTAT and implementing policies on the governance of
national data under the supervision of the Saudi Data and Artificial
Intelligence Authority (SDAIA) regarding data sharing with external
entities. The center also provides automation of reports, dashboard
building and advanced analysis using data science and artificial
intelligence technologies.
The Government also aims to build a framework for a consolidated
financial balance sheet for managing the public sector’s sovereign

BUDGET STATEMENT Fiscal Year 2022 66

assets and liabilities to form a comprehensive vision whereby the
project covers sovereign assets and liabilities (financial and non-
financial). The framework aims to consolidate the data on financial
liabilities to draw a comprehensive fiscal position of the government
in line with the requirements of the sovereign assets and liabilities
framework, and can, thus, identify strengths of the fiscal position of
the public sector to contribute to the support and sustainability of
public finance policy.
As part of the continuous efforts of fiscal reform, the Medium-
Term Financial Planning Initiative was launched, which aims to
raise the efficiency of financial planning of the budget by aligning
the medium-term fiscal framework with national priorities and
gradually shifting to a multi-year budget approach by 2024. The
initiative focuses on building a general framework for medium-term
fiscal planning in accordance with international best practices and in
line with the Kingdom’s Vision 2030 by developing strategic, financial
and executive frameworks and methodologies for estimating
revenues and expenditures on the level of government agencies in
the medium-term and providing human and technical capabilities
that support them, which will directly reflect on raising the efficiency
of planning at the state level and at government agencies level, and
help maintain fiscal sustainability.
The Kingdom’s Government also continues its efforts aimed at
enhancing the transparency of public finance and raising the quality
of fiscal data to enhance disclosure levels. Many official reports on
the budget have been developed and are continuously enhanced on
an annual basis according to international best practices. This comes
in addition to the introduction of Etimad platform, which comprises
all MOF services to various government agencies and the private
sector, under the broader umbrella of the digital transformation

BUDGET STATEMENT Fiscal Year 2022 67

in the Kingdom. The FSP aims, through the National Center for
Government Resource Systems (NCGR), to build the unified system
for government resources that will support the decision-making
process by activating the role of data analysis to build a business
intelligence platform.
In addition, work is underway to improve cash management and
Treasury Single Account (TSA) by unifying government payments
and eliminating intermediary accounts for government agencies in
SAMA and local banks to unify payments to beneficiaries directly
through a treasury current account with SAMA. This includes:
• Improving, developing, and applying the management of
cash flow projections and developing a methodology for its
management by reviewing the procedures and reports issued
by the agencies,
• Developing work procedures and a governance model at the
MOF,
• Issuing cash flow reports and ensure that they reach the
relevant authorities in a timely manner to assist decisions,
• Improving and accelerating the procedures for payment orders
and facilitating the associated operations through automation,
which helps government agencies to track them at various
stages to solve problems related to payment orders quickly
and avoid delays and related claims,
• Resolving the issue of the existence of legal regulations and
legislation that may conflict with the concept of applying the
TSA.
This targets all government agencies to enhance the effectiveness
of fiscal planning and the efficiency of government spending,

BUDGET STATEMENT Fiscal Year 2022 68

which will result in the concentration of revenues, improvement of
expenditures, and effective cash management to optimally utilize
cash surpluses. In addition, work is being done to shift from a cash-
based accounting system to an accrual-based system.

Expenditure and Projects Efficiency

EXPRO was established to enable the continuation of achieving
spending efficiency and to support government agencies in the field
of project and facility management. The Government achieved several
objectives and gains throughout the past years in capital projects, in
the form of saving more than SAR 400 bn that was redirected to the
prioritized spending avenues and areas. The authority developed a
working plan with about (20) of the highest-spending government
entities to develop medium-term portfolios for capital projects,
organize project priority according to sectoral strategies and attune
them to the objectives of Vision 2030 and the national trends, in
addition to balancing them with the expenditure ceilings according
to the objectives of the FSP.
The electronic market (the Etimad Market), which includes the
framework agreements that EXPRO signed on behalf of government
entities, was activated this year. Framework agreements for
expenditure groups with an annual value of approximately SAR 15 bn
were tendered to benefit from the bulk procurement of these groups
and lower the cost of the unit price by around 15 - 25%, in addition
to supporting the local content and SMEs, as well as raising the level
of transparency and competitiveness of the private sector. Moreover,
framework agreements contribute to reducing sourcing cycles and
accelerating invoicing and disbursement for suppliers.
Moreover, EXPRO reviews operation and maintenance manuals
through the integration of expertise between the assets and facilities

BUDGET STATEMENT Fiscal Year 2022 69

management sector and the procurement efficiency sector. In
addition, EXPRO continues to support the Operation and Maintenance
Contracts Nationalization Initiative in cooperation with the agencies
participating in the steering committee of the initiative to raise
nationalization percentages and improve the capabilities and skills of
the workers in government contracts, as several specialized courses
for development and qualification have been held to increase the
technical knowledge of workers in the field of contracts. It is worth
noting that since the launch of the Operation and Maintenance
Contracts Nationalization Initiative in 2019, the number of jobs that
have been filled by Saudi nationals has reached 88 thousand.

The Privatization Program

Since 2016, the Privatization Program has accomplished many
achievements that contributed positively to GDP and achieved
savings in government spending by strengthening the partnership
between the public and private sectors.
The program aims to develop strategies to privatize the targeted
sectors to enhance the role of the private sector in improving the
quality of services provided, alleviate fiscal burden, and ensure
optimal utilization of government assets by making them available
for private investment, in accordance with Saudi Vision 2030.
In addition, the program seeks to attract foreign direct investment
and improve the balance of payments for the targeted sectors, the
most important of which are: communications and information
technology; environment, water and agriculture; education; health;
municipalities; public transportation; energy; Hajj and Umrah;
housing; labor and social development; media; industry and mineral
wealth; sports; and public real estate.

BUDGET STATEMENT Fiscal Year 2022 70

2. Economic Enablers
The Kingdom’s economy is witnessing continuous increase in the
role of economic enablers that support the private sector. On top of
these comes the contribution of projects and programs undertaken
by the PIF and the NDF, as a complementary role to what is being
spent through the budget in a consistent and integrated basis.
Enablers also include progress in the implementation of the NIDLP,
the NIS, the “Shareek” Program, the FSDP, and privatization, all of
which aim to enhance the performance of the private sector. At the
same time, the success of these enablers will reflect positively on the
fiscal performance by stimulating and diversifying economic growth
and thus improving non-oil revenues. It is also expected to reduce
pressure on government spending, especially with the private sector
leading the investment and employment.

The Financial Sector Development Program

The Kingdom has achieved several objectives by the end of FY
2021 under the FSDP umbrella, by increasing the loans of SMEs to
reach 8.1% of the GDP, and the increase in the size of the debt market,
which reached 27% of the GDP.
The FSDP is to plan and implement many initiatives and projects
during the FY 2022 and the medium-term. This includes facilitating
electronic transactions for financing activities, incentivizing the
private sector to list in the Saudi stock exchange, listing commercial
government assets and projects in the financial market and enabling
the growth and spread of investment funds that engage in finance
activities.
The program targets several pillars, the most important of which is
to support the growth of the private sector through the development

BUDGET STATEMENT Fiscal Year 2022 71

of the banking sector, so that total banking assets will exceed SAR
3.5 tn barrier by FY 2025. The program also targets raising the
private sector’s credit to nearly SAR 2 tn by FY 2025, the share of
bank financing to SMEs to 11%, the number of participants in the
field of financial technology to reach 30 entities.
This is in addition to the pillar of developing an advanced
financial market by raising the percentage of foreign investors’
ownership of the total market value of free float to reach around
17.5% by FY 2025, increase the volume of institutional investor
trading to reach 44% of the total trading volume, and raise assets
under management to reach 31% of GDP.

The Public Investment Fund

The PIF is one of the largest sovereign wealth funds in the world.
The fund has achieved significant leaps on the local and global
economic levels, through a number of giant investment projects that
have contributed to advancing the national economic transformation,
as well as deepening the concept of sustainable positive change in
the context of global investment efforts.
The PIF has made great achievements since it was associated
with the Economical and Development Affairs Council in 2015. It has
contributed to achieving clear impact at the local and global levels
in pursuit of the ambitions it aim to achieve in the medium-term and
by 2025. These ambitions include: the contribution of the PIF, and
its subsidiaries, to the non-oil GDP to reach SAR 1.2 trillion, and the
investment at an average of SAR 150 bn annually in new domestic
projects. The PIF, and its subsidiaries, aim to utilize the local content
at a percentage of 60%.

BUDGET STATEMENT Fiscal Year 2022 72

 The PIF aims to execute 38 initiatives that will be realized through
the establishment of more than 35 strategic companies starting
from 2018 to the second quarter of 2021. The aim is to raise the
PIF’s assets by:
• launching new sectors to diversify the Saudi economy,
nationalizing and investing in promising sectors,
• strengthening the Kingdom’s role in the transport sector to
become a logistical center regionally and globally,
• benefiting from the Kingdom’s natural capabilities to develop
the utilities and renewable energy sector by reaching a
renewable capacity of 58.5 gigawatts in 2030,
• developing innovation capabilities in the Kingdom through
localizing the technology sector and developing the
communications and media sector,
• diversifying and enriching the experience of tourism,
entertainment and sports in the Kingdom to achieve a more
vibrant society, as the PIF’s hotel projects include roughly
136,000 hotel rooms, targeted to be ready for use by 2030.
• The PIF also has a significant contribution to supporting the
development of the real estate sector through the establishment
of new companies such as Roshn, which is in the process of
developing more than 395,000 housing units on a total area
of 181 km2, hosting more than two million residents, which is
expected to contribute more than SAR 212 bn directly to the
Kingdom’s GDP until 2030, and the creation of more than 101
thousand direct jobs until 2030.

BUDGET STATEMENT Fiscal Year 2022 73

The National Industrial Development and Logistics Program
The sectors of the program witnessed many achievements. Among
the most important of these achievements is the program’s investment
of around SAR 9.6 bn in projects in the industrial infrastructure in FY
2021, as construction works have been completed for 153 plants
that ready for operation in 4 industrial cities and oases, contributing
to the enablement of entrepreneurs and small investors, through
the provision of financing loans for industrial investors by the Saudi
Industrial Development Fund, following the increase that brought
its capital to SAR 105 bn. Moreover, the Military Industrial Licensing
Program was launched, with 142 establishment permits granted
to 99 local and international companies, and investments reaching
SAR 25.2 bn until 2021. The “Saudi Made” Program was launched to
build a uniform industrial label for the Kingdom around the world.
The latter program has listed more than 1100 local companies
into the program until now, with more than 4500 products from 16
different sectors. Non-oil revenue in September of FY 2021 achieved
the highest monthly figure in its history, reaching SAR 25.3 bn, as
a direct result of the improvement of the legislative environment.
Moreover, the establishment of the Saudi Export-Import Bank (EXIM)
contributed to the realization of this achievement, as the bank
accepted 81 financing requests valued at SAR 9 bn to help Saudi
products reach more than 46 countries.
In renewable energy, agreements to purchase energy for
7 different projects across the regions of the Kingdom have been
signed, with 5 investment alliances comprised of 12 local and
international companies. With that, the capacity of the renewable
energy projects – that are in progress – rises to 3670 megawatts.
The Shuaibah IPP PV Project achieved the lowest cost for purchasing

BUDGET STATEMENT Fiscal Year 2022 74

electric power via solar energy in the world at 1.04 cents per kilowatt
hour. The Skaka Solar Energy Project has become fully operational
at a capacity of 300 megawatts. In addition, the pilot run for the
Domat Al Jandal Wind Farm has begun, which is the largest plant for
generating power through wind in the Middle East with a production
capacity of 400 megawatts.
In the logistics services sector, the National Strategy for
Transportation and Logistics Services has been launched, and 5 new
logistics zones have been established. Moreover, the Saudi Academy
has been launched, with 120 trainees completing training there since
the academy was established in Q4 2021. Additionally, the timeframe
for custom clearances has been reduced from 288 hours to 7 hours,
which expedited customs procedures and made them more agile. As
a result, the Kingdom ranked first globally on the Road Connectivity
Index for 2021, according to the Global Competitiveness Report.
Moreover, Saudi ports achieved 70.68 points on the United Nations
Conference on Trade and Development (UNCTAD) Index, claiming the
first position regionally.
As for the mining sector, the “General Program for Geological
Survey”, the world’s largest geological and regional study, was
launched. Additionally, the accelerated exploration initiative was
launched, with the aim to gain geological data to explore mining
opportunities in the Kingdom. Moreover, the “Mining” platform was
launched and has been facilitating the issuing of investor licenses in
record times, as more than 120 new mining licenses were granted
in 2021.
As a result of the efforts of the programs in all of its sectors, it
has contributed to attracting local and foreign investments with a

BUDGET STATEMENT Fiscal Year 2022 75

value exceeding SAR 338 bn. The program will continue the efforts to
achieve its objectives for next year to set the stage for implementing
several future projects that are associated with the objectives of the
program’s sectors in the push towards achieving Vision 2030.

The National Investment Strategy

The NIS aims to increase the quality and volume of investments
in the Kingdom in line with the Saudi Vision 2030 in all priority
sectors. The strategy seeks to achieve this goal through raising the
contribution of the private sector, improving the balance of payments
and the economy in the Kingdom, supporting and developing the
growth of strategic sectors, and upgrading investment to promote
innovation and help develop local content.
The strategy also aims to achieve tripling the volume of annual
investments to reach SAR 2 tn by FY 2030, equivalent to 30% of GDP,
increasing the gross domestic investment component of gross fixed
capital formation by more than double, to reach SAR 1.65 tn, and
increasing FDI flows by about twenty times by FY 2030, equivalent to
5.7% of GDP.
The objectives of the strategy result in cumulative investments
for the years 20212030- exceeding SAR 12.4 tn, as the NIS will be
the overarching umbrella for all the targeted investments. Many
categories of participants contribute to the achievement of these
investments, most notably the “Shareek” Program with SAR 5 tn,
PIF with SAR 3 tn, domestic investments with SAR 2.6 tn, and FDI
with SAR 1.8 tn. This is in addition to SAR 10 tn of government
expenditure through the budget and, at least, about SAR 5 tn of
private consumption expenditure. Thus, the overall expenditure
exceeds SAR 27 tn until the year 2030.

BUDGET STATEMENT Fiscal Year 2022 76

The “Shareek” Program
The “Shareek” Program was launched during FY 2021. It aims to
increase investments of local private sector companies (both listed
and unlisted) participating in the program to reach SAR 5 tn by FY
2030, by providing government incentives in coordination with the
relevant authorities. The “Shareek” Program is one of the initiatives
of the NIS. Criteria for evaluating incentives and mechanisms for
discussing corporate projects and the required incentives with
the relevant government agencies were approved to enable the
achievement of the program’s objectives. It is expected that SAR
185.6 bn of local investments will be achieved by the end of FY 2021. It
is also planned to increase the number of companies participating in
the program and start granting approvals for the required incentives
that meet the set criteria during FY 2022 and the medium-term.

The National Development Fund

The NDF is one of the pillars of financial empowerment for the
Kingdom’s Vision 2030, as the fund enhances the performance,
efficiency and financial sustainability of development funds and
banks in the Kingdom and enables them to achieve the desired
goals of economic development. The Fund supervises 11 entities,
including those that focus on sectors such as the Saudi Industrial
Development Fund and the TDF, and those that focus on beneficiaries
such as the Social Development Bank and the Small and Medium
Enterprises Bank, in addition to those that focus on activities,
including the EXIM and the Saudi Infrastructure Fund, which will be
one of the specialized lending institutions in the Kingdom to finance
infrastructure projects in vital sectors such as transportation, water,
energy, health, education, communications and digital infrastructure,
which will have a positive impact on the Kingdom’s budget.

BUDGET STATEMENT Fiscal Year 2022 77

 During the FY 2021, the NDF added the EXIM to the list of funds and
banks under its affiliation to maximize its impact on the economy. The
Fund also approved the establishment of a program to finance the
e-games and sports sector and the update the “Hafez” Program for
organizing the job search in cooperation with the Human Resources
Development Fund (HRDF) in order to improve its efficiency and
effectiveness.

3. Structural Transformations
The budget and the medium-term fiscal framework reflect
the continuation of spending on other VRPs such as the NTP, the
Human Capability Development Program (HCDP), the Quality of Life
Program, the Health Sector Transformation Program, the Housing
Program, and the Doyof Al Rahman Program, which would induce
positive structural changes in these sectors and reflect favorably on
the standard of living of citizens and the services provided for them.
Below is a detailed explanation of the development of spending on
these programs..

The Housing Program

The second phase of the program was launched in mid-2021,
to prepare the infrastructure for more than 45 thousand housing
units in FY 2022. This will be achieved through partnerships of the
National Housing Company with developers to provide an additional
18 thousand housing units in FY 2022, reaching a total of nearly 300
thousand housing units ready for delivery in FY 2025. Moreover, the
financial support initiative for those eligible for housing support
(Subsidized 2.0) will serve 355 thousand beneficiaries of various
types of support provided by the end of 2025, in addition to the
(Developmental Housing 2.0) initiative that will provide an additional

BUDGET STATEMENT Fiscal Year 2022 78

30 thousand housing units during FY 2022 for the beneficiary
classes who are in most need of housing, with the expectation that
the number of these units will reach 95 thousand units in 2025.

The Quality of Life Program

During 2021, the program made several achievements in
various sectors, which will positively reflect on the quality of life
of the individual and the family. These most notably include: the
development of human capital in the culture sector, such as the
launch of the “Talent Development in Film Industry” program to
support the local film industry with the aim of reaching the number
of cultural facilities to 41 facilities in 2023 and 183 in 2030. Regarding
the development of the tourism sector, the Kingdom aims to reach
56.8 million tourist visits in 2023 and 100 million in 2030. In the same
vein, the municipal sector has launched the municipal investment
portal “Furas”, which combines all investment opportunities in a
unified platform that enables investors to access opportunities in
various regions of the Kingdom, such as providing sites where event
organizers and entertainment project owners can invest. It is worth
noting that the entertainment sector has a target of providing 345
entertainment venues in 2023 and 613 venues in 2030. This comes
in addition to developments in the sports sector which include
empowering women to participate in sports in a more effective way,
such as the participation in the Kingdom’s mission to the Olympics.
Among the targets of the sports sector is for the number of places
where sports activities and programs are implemented by the Saudi
Federation for Sports for all to reach 1032 during 2023. The Quality
of Life Program is also working to place a number of Saudi cities
among the top 100 livable cities globally, with one city targeted to be
included in 2023 and 3 cities in 2030.

BUDGET STATEMENT Fiscal Year 2022 79

The National Transformation Program
The NTP continued its structural reforms that enables it to achieve
its strategic objectives. Among the most prominent achievements
related to the goal of foreign investments and empowering the
private sector is the completion of more than 750 reforms to serve
investors by the end of Q3 2021. This includes legislative reforms and
other reforms to improve the business environment, in addition to
facilitation and automation of procedures. Regarding unemployment,
its rate has decreased for Saudis (males and females aged 15 years
and over) to reach 11.3%, while the female participation rate increased
to 33.8% in H1 2021.
To facilitate the digital transformation in the government sector,
the “Digital Government Policy” was launched in September 2021.
It should be noted that government digital services maturity has
increased by 83% during Q2 2021, with a target of achieving 92%
by 2025. With regard to promoting community development and
developing the non-profit sector, non-profit organizations registered
in the Kingdom increased to 2,717 Non-Governmental Organizations
in H1 2021, a growth rate of 66.5% compared to 2017. The percentage
of the private sector’s contribution to the total social spending also
increased to 1.35% at the end of Q4 2020, with a target for the index
to be 1.79% by 2025, to strengthen corporate social responsibility.
As for the transformation in the justice sector, the Entrustment and
Liquidation Center “Infath” was launched in June 2021 to address
cases of liquidation and speed up the process of fulfilling rights. The
program aims also to strengthen the infrastructure in water services.
The coverage of sewage services for the population increased to
58.7% by the end of Q2 2021.

BUDGET STATEMENT Fiscal Year 2022 80

The Health Sector Transformation Program
The program has rapidly achieved several goals, the most
prominent of which is that the Residential Communities Index reached
85.7%, including the peripheral areas covered by basic health care
services, compared to a target of 88% in 2025, to facilitate access
to health services. Regarding the goal of improving the quality and
efficiency of health services, beneficiaries’ evaluation of the health
services experience provided by primary health care centers has
reached 79.4%, compared to the target of reaching 81.7% in 2025. To
enhance prevention against health risks, the Health Zones’ Readiness
Index reached 52%, with a target of 90% in 2025. As for enhancing
traffic safety, road accident deaths was reduced to 13 persons per
100 thousand inhabitants, compared to the target of 12 persons in
2025.

Human Capability Development Program

The HCDP was launched in September 2021 to enhance the
competitiveness of Saudi citizens locally and globally, by developing
their basic and future skills and capabilities in various fields in order
to meet the requirements of the labor market. The program includes
89 initiatives distributed over three main pillars: developing a flexible
and solid educational foundation for all, preparing for the future
labor market locally and globally, and providing lifelong learning
opportunities, all of which should help achieve 16 strategic goals of
the Saudi Vision 2030, of which several goals are to be achieved in
2025, most notably:
• Raising the rate of enrollment in kindergarten education to
40%,

BUDGET STATEMENT Fiscal Year 2022 81

 • Improving basic education outcomes by raising the Kingdom’s
ranking among the G20 member states on the World Bank’s
Human Capital Index (HCI) to the eleventh rank.
• Improving the ranking of educational institutions by raising the
number of the Kingdom’s universities ranked globally among
the top 200 universities to 6 universities,
• Harmonizing education outcomes with the needs of the labor
market, aiming to raise the percentage of nationalization in
high-skilled jobs to 40%, while improving the readiness of young
people to enter the labor market by reducing the percentage of
young people outside the education, training and work system
to reach 10%.

The Doyof Al Rahman Program

The program aims at providing the largest possible number of
Muslims with the opportunity to perform Hajj and Umrah by upgrading
the system of services provided to pilgrims and increasing its
capacity, while enriching and deepening their religious and cultural
experience, and reflecting the bright and civilized image of the
Kingdom in the service of the Two Holy Mosques. Several initiatives
of the program were launched and implemented during 2021, some
of which have been completed and others are still in progress, as
follows:
• Signing the contract for the Bus Rapid Transit in Madinah,
which involves the construction of two main lanes covering a
total length of 52 km, and includes 33 stops and a capacity of
1,800 passengers per hour.
• Signing an agreement to launch comprehensive service
centers for visitors to the Prophet’s Mosque.

BUDGET STATEMENT Fiscal Year 2022 82

 • Completion of the project to improve the guiding system at all
the gates of the courtyards of the Prophet’s Mosque.
• Launching the first stages of the development of Islamic
historical sites and mosques, including: Jabal Al-Nour -
Al-Hudaybiyah peace agreement site – The Seven Mosques -
Badr Battle site.
• Supervising the initiative to implement the infrastructure of bus
lanes and stations in order to strengthen the public transport
system in Makkah.
In the next phase, the program seeks to provide a transformative
spiritual experience for the pilgrims by facilitating procedures to
enable hosting 30 million Umrah visitors in the future. The program
will also continue to prepare sites of Islamic history in a way that
ensures the enrichment of the religious and cultural experience of
pilgrims and Umrah visitors, while achieving integration between all
parties involved to improve the system of services provided.

BUDGET STATEMENT Fiscal Year 2022 83

04
Key Fiscal and Economic
Risks and Challenges
Fourth:
Key Fiscal and Economic Risks and Challenges

The budget for FY 2022 and the overall medium-term economic

and fiscal framework were built on a set of assumptions that are
consistent with prevailing local and global economic developments
at the time of budget preparation. The direction of public finance may
be affected. Consequently, the execution of the budget next year and
the projections in the medium term may be affected by any updates
to fiscal and economic estimates.
This part discusses the key risks and most important challenges
that may face the Saudi economy in light of potential local and global
developments, which could affect estimates in the medium-term.
It also reviews the main policies that the Government is aiming to
apply to mitigate those challenges.

The Global Economy

Inflation: The rebound in economic growth, witnessed in parts of
the world after vaccine rollout, the gradual reopening of economic
activity, and the resumption of in-person working and learning, has
led to an acceleration in global inflation in H2 FY 2021, due to demand
pressures on basic commodities and raw materials, coinciding with
a shortage in global supply. The recent rise in commodity prices
was also linked to export restrictions associated with precautionary
measures and higher customs duties, as well as higher cost of
transportation including sea and land freight.

BUDGET STATEMENT Fiscal Year 2022 85

 Based on these developments, the IMF, in its World Economic
Outlook Report for October 2021, has expected that inflation
momentum will continue in the coming months before returning
to pre-pandemic levels by mid-2022, with long-term inflation
expectations remaining stable. This poses a challenge, especially
to emerging market and developing economies as inflationary
pressures continues to build up, calling for the tightening of monetary
policy. In the case of the Kingdom, it is expected that imported goods
will have a greater impact on inflation rates, due to its direct effect
on the prices of local goods and services.
The “COVID-19” Pandemic: The expansion of vaccination in H2
2021, the continued adaptation of economic activities to precautionary
measures, as well as the stimulus provided by many governments to
stimulate economic activity, has led to the spread of optimism around
the recovery from the crisis. This is due to the expectations that the
acceleration of vaccination would limit the spread of new variants
and ease the restrictions imposed, leading to higher confidence of
the business sector, the recovery of the private investment, rise in
productivity rates, and thus demand recovery faster than expected.
However, the global economy is still facing challenges despite
witnessed recovery due to the outbreak of the mutated “Delta”
variant, and possible other variants, that are rapidly spreading in
some countries, and the uneven speed of containing this epidemic
in different parts of the world. There are differences in the pace of
vaccine distribution that could allow the emergence of new mutated
variants that may set back the desired recovery path and delay the
achievement of community immunity. On the other hand, countries
that have achieved low levels of infection with the virus are also at

BUDGET STATEMENT Fiscal Year 2022 86

risk, as reflected in the reduction of the IMF’s forecast for global
economic growth for FY 2021 in October compared to July, mainly
due to the emerging problems in the global logistics and supply
chains, with expectations of stable growth of the global economy in
FY 2022.
In the Kingdom, flights were suspended from countries that
recorded high cases of infection with the mutated virus last July,
while preventing direct and indirect travel without obtaining prior
permission from the authorities and obliging arrivals to quarantine
for a period of 14 days from the date of arrival. The Kingdom has also
taken many early and firm precautionary measures, by imposing
social distancing and dedicating resources on several fronts to
contain, prevent, prepare for, detect and treat infections within an
integrated national approach that includes all citizens, residents and
illegal labor free of charge and without any penalties (for the latter).
The target was to increase the rate of vaccination, and increase
community immunity which makes virus transmission more difficult.
The vaccination rate in all regions has reached more than 70% of
the population. The Government is also managing the financing
needs to confront the pandemic as a major priority for government
expenditures.
Interest Rate Changes: Higher US interest rates would have an
impact on the domestic economy and fiscal indicators. Assuming
Federal Reserve’s intervention to limit the rise in inflation rates
through a gradual rise in US interest rates, more than estimated, in
the medium-term, this will be reflected on an increase in domestic
interest rates, which may negatively affect local consumption and
investment. Consequently, this may affect the projected growth of

BUDGET STATEMENT Fiscal Year 2022 87

government revenues. The Kingdom is addressing this by reducing
financing needs and realizing budget surpluses in the medium-term.
This enhances the cohesion between the fiscal and monetary policies
that SAMA is implementing through the available tools to limit this
negative impact.

Oil Markets
Global oil markets witnessed positive developments supported
by the continued global economic recovery and containment of the
repercussions of the “COVID-19” pandemic. Oil price projections of
major international institutions indicate an increase in oil demand
during FY 2022, which will help stabilize market prices.
The continued imposition of precautionary restrictions associated
with the pandemic to limit the effects of these strains poses a
challenge to the stability of local and global oil markets. The past
years witnessed sharp fluctuations in oil prices, as the average price
of Brent crude during 2018 reached $71.3 per barrel, then decreased
to $42.0 per barrel by the end of FY 2020, rebounding to an average
of $69.5 per barrel until October of this year.
As explained earlier, several revenue scenarios to consider the
highest and lowest levels of estimated revenues were prepared in
light of the developments in global markets. Additionally, the Kingdom
seeks – through its oil policy and efforts to support the (OPEC+)
agreement – to gradually boost its production levels to support
the stability of oil prices and achieve a balance between demand
and supply to face potential risks on the side of its oil revenues. In
addition, the Government adopts fiscal and economic policies aimed
at diversifying its economic base and reducing its dependence on oil

BUDGET STATEMENT Fiscal Year 2022 88

revenues, which is positively reflected in raising the growth rates of
non-oil GDP. At the same time, the Government’s adoption of fiscal
sustainability rules, particularly amid the process of transformation
in the mechanism of calculating oil revenues, contributes to the state’s
process of fiscal planning, from basing estimates on future oil prices
to calculating structural oil revenues, based on a standard historical
oil price with the aim of building more stable expenditure ceilings,
limiting procyclical spending that is influenced by the fluctuations
and volatilities in oil prices, tying expenditure to structural revenues,
and establishing quantitative controls for the size of growth in
expenditure ceilings.

Daily Brent Crude prices

from January to October 2020 Vs. 2021
$90.00

$85.00
$84.12
$75.00

$65.00

$55.00

$45.00

$35.00

$25.00 $15.17

$15.00

$5.00
January February March April May June July August September October

2020 2021

Source: U.S. Energy Information Administration (EIA)

BUDGET STATEMENT Fiscal Year 2022 89

Other Challenges for the Local Economy
Quick and decisive reforms played an important role in
accelerating the containment of the impact of the pandemic on the
local economy at a faster pace than expected. In addition, previous
structural reforms contributed to the Kingdom’s ability to manage the
crisis effectively and efficiently. Moreover, the digital infrastructure
played a pivotal role in providing health applications, government
services and security solutions after the return of economic activities
from the closure.
However, challenges pertaining to the development of the
pandemic are still impending despite its receding. The Government
of Saudi Arabia, with the experiences gained in the past two years, is
ready to address these challenges as required.
On the other hand, the challenges include also the ability of the
private sector to take advantage of the opportunities available in
the ambitious programs and projects adopted by the Kingdom’s
government, and the ability to implement projects at the desired rates.
The Government is working to continue economic diversification,
structural reforms in the labor market, and raising productivity rates
in the economy, which will have a positive impact on non-oil GDP
growth rates.

Positive Factors
There are positive factors that can contribute to improving the
fiscal and economic outlook over current projections, the most
important of which is the possibility of a faster improvement in the
global economy, which will increase the demand for oil, push oil
prices up and thus reflect positively on GDP and oil revenues to higher

BUDGET STATEMENT Fiscal Year 2022 90

than the budget estimate. The budget has also assumed gradual
implementation of the initiatives, projects and programs. If the
implementation goes faster than expected, and the private sector’s
responsiveness to these initiatives and the opportunities available
for investment is higher, this will increase the growth rates of non-
oil output and non-oil revenues. Moreover, the return of tourism to
its pre-pandemic levels, with the potential expansion next year and
in the medium-term, will have positive effects on consumption rates
and other productive and service activities in addition to the positive
impact on the balance of payments. On the other hand, the regression
in global inflationary pressures may lessen the pressure on the
anticipated increases in US interest rates, which will be reflected
in domestic interest rates, and will reduce the cost of government
financing and the cost of borrowing by the private sector. All these
factors will bring about an additional improvement in the fiscal and
economic indicators during the coming year.

BUDGET STATEMENT Fiscal Year 2022 91