Riyadh has announced yet another record budget for 2014. But the 4.3% spending hike is lower than in previous years, in an attempt to rein in the spending boom which followed the 2011 uprisings in the Arab world. The Saudi government appears to be heeding the IMF’s recent advice that the state budget could fall into a deficit by late 2016 if expenditure continues to rise.

The 2014 budget is balanced at SR855bn ($228bn), with total revenue rising by 3.1%. The 2012 and 2013 budgets projected small surpluses, whilst budgets in preceding years projected deficits (see table 1). In reality, barring an oil price collapse, Saudi Arabia is likely to post a healthy surplus for 2014, as it did for preceding years, given that its balanced budget is based on highly conservative oil price assumptions (see below). That said, the actual surplus for 2013, at SR206bn ($54.9bn), is sharply down from the previous year’s SR386bn ($53.3bn), leading to the IMFs warnings. Saudi bank NCB predicts the surplus will narrow to a mere SR20bn ($5bn) for 2014 (see graph). The new budget, endorsed by the Council of Ministers on 23 December 2013, is nevertheless expansionary, as in previous years. (CONTINUED - 1306 WORDS)