Kingdom of Saudi Arabia Ministry of Finance

Highlights of Fiscal Years 1434/1435 (2013) & 1435/1436 (2014)

23 December 2013

Government

• The Kingdom of Saudi Arabia is an absolute monarchy, under the al-Saud family. The current ruler is King Abdullah, the sixth ruler of the country since its independence from the Ottoman Empire.

• Saudi Arabia has no formal written constitution, although the king is bound by the Koran and sharia law. Elections and political parties are forbidden. There are an estimated 7,000 princes, but the oldest generation wields much greater political power than the younger ones. The princes head all of the key government ministries.

Population:

• Saudi Arabia has approximately 27 million inhabitants, but 5.5 million of that total are non-citizen guest workers. The Saudi population is 90% Arab, including both city-dwellers and Bedouins, while the remaining 10% are of mixed African and Arab descent.

Languages:

• Arabic is the official language of Saudi Arabia. There are three major regional dialects: Nejdi Arabic, with about 8 million speakers in the center of the country; Hejazi Arabic, spoken by 6 million people in the western part of the country; and Gulf Arabic, with about 200,000 speakers centered along the Persian Gulf coast.

• Foreign workers in Saudi Arabia speak a vast array of native languages, including Urdu, Tagalog, and English

Religion:

• Saudi Arabia is the birthplace of the Prophet Muhammad, and includes the holy cities of Mecca and Medina, so it comes as no surprise that Islam is the national religion.

Economy:

• Saudi Arabia's economy comes down to just one word: OIL. Petroleum makes up 80% of the kingdom's revenue, and 90% of its total export earnings. That's unlikely to change soon; about 20% of the world's known petroleum reserves are in Saudi Arabia.

• The kingdom's per capita income is about $31,800 (2012). Unemployment estimates range from about 10% to as high as 25%, although that includes only males. The Saudi government forbids publication of poverty figures.

• Saudi Arabia's CURRENCY is the riyal. It is pegged to the US dollar at $1 = 3.75 riyals.

Highlights of 2013 Fiscal Year

• Total revenue was projected to be around SR 1,131 (US $301.6) billions in 2013 and expenditure to be around SR 925 (US $246.7) billions. As a result, a surplus of SR 206 (US $54.9) billions should be realized

• Preliminary estimates indicated that the public debt will decline from around SR 98.8 (US $26.3) billions at the end of 2012 to around SR 75.1 (US $20) billions at the end of 2013, representing less than (2.7) percent of projected GDP for 2013.

• The number of government projects signed with the private sector in 2013 amounted to (2,330) with a total value of around SR 157 (US $41.9) billions.

Overview of 2014 Budget

• For the first time since 2005, the Saudi government has announced a balanced budget for 2014, in sharp contrast to projecting surpluses in earlier years. Revenues and expenditures for 2014 are forecasted to be at similar levels of around SR855 billion. On the other hand, the Saudi Arabian budget expenditure outlay, which had witnessed sharp increase over the past few years in the wake of the Arab spring, is set for a contraction in 2014.

Some important Facts:

• Expansionary spending measures adopted in the past are not sustainable .

• Saudi economy grew at a slower pace of 3.8% in 2013 vs 5.8% in 2012.

• The oil sector contracted 0.6% in 2013 on the back of marginally lower oil prices compared to 2012 and a drop in oil production to 9.6 million barrels per day in the year-to-date period, down from previous year’s average 9.8 million barrels per day.

• Non-oil private sector maintained a strong growth of 5.5% year-on-year, supported by sectors such as construction, retail, transport and communications, all growing at above 5% year-on-year

• The Saudi current account recorded a surplus of around SR486.8 billion in 2013 compared to a surplus of SR617.9 billion last year, a decrease of 21.2%, on account of lower oil export earnings.

• import of goods rose 8.0% on a year-on-year basis to SR574.1 billion as imports of transport equipment rose during the year.

• The nation’s debt and liquidity situation remains fairly comfortable. The country reduced its debt from SR98.8 billion in 2012 to SR75.1 billion in 2013, and represents about2.7% of 2013 GDP.

• Oil revenues likely to fall 25% in 2014

• Slow down in the pace of planned expenditure in 2014 , a reaction to the International Monetary Fund‘s (IMF) warning of a budget deficit by 2016.

• Capital expenditure gets a reduced share in overall expenditure

The National Budget for 1435/1436 (2014)

The followings are the main highlights of the budget:

• 1. Total revenue is estimated at SR 855 (US $ 228) billions.

• 2. Government expenditures is budgeted at SR 855 (US $ 228) billions.

• Budget appropriations will continue to focus on investment programs that enhance long-term strong and sustainable economic development and employment opportunities for Saudi nationals. Specifically, the focus will be on infrastructure, education, health, social services, security services, municipal services, water and water treatment services, roads and highways. Moreover, the budget attaches particular emphasis on science and technology projects and e-government.

Revenue Sources

• Oil 90%

• Construction 5%

• Others 5%

Appropriations

1. Education:

• Total expenditure amounts to around SR 210 (US $56) billions, representing (25) percent of FY 2014 total appropriations and an increase of (3) percent over FY 2013 appropriation.

2. Health and Social affairs:

• Total expenditure amounts to around SR 108 (US $28.8) billions, an increase of (8) percent over FY 2013 appropriation.

3. Municipality Services:

• Total expenditure amounts to around SR 39 (US $10.4) billions, an increase of (9) percent over FY 2013 appropriation.

• The budget includes new projects for inter-city roads, bridges, drainage and control systems. It also includes other environment-related projects.

4. Infrastructure and Transportation:

• Total expenditure amounts to around SR 66.6 (US $17.8) billions, an increase of (2.5) percent over FY 2013 appropriation.

5. Water, Agriculture, Industry, and other Economic Resources:

• Total expenditure amounts to around SR 61 (US $16.3) billions, an increase of (5.7) percent over FY 2013 appropriation.

• The budget includes new projects amounting to around SR 33 (US $8.8) billions for increasing water resources through building dams, desalination, utilizing deep aquifers wells, and expanding and improving water and water treatment networks.

6. Specialized Credit Development Institutions and Government Financing Programs:

• It is estimated that around SR 85.3 (US $22.75) billions will be disbursed in 2014 by these institutions

Economic Developments in 2014

Gross Domestic Product (GDP)

• According to the Central Department of Statistics and information (CDSI), GDP is estimated to reach SR 2,794.8 (US $745.3) billions in current prices in 2013, reflecting a growth rate of (1.54) percent. The private sector is estimated to grow by (9.38) percent, whereas the oil sector declined by (3.83) percent in 2013.

Foreign Trade and Balance of Payments

• According to the Saudi Arabia Monetary Agency (SAMA) preliminary data, total exports of goods are estimated to be around SR 1,376.2 (US $367) billions in 2013, a decrease of (5.5) percent from last year. Non-oil exports of goods are estimated at around SR 197.6 (US $52.2) billions, reflecting an increase of about (3.9) percent over last year and (14.4) percent of total goods exported.

• Total imports of goods are estimated at around SR 574.1 (US $153.1) billions in 2013, growing by (8.0) percent compared to last year.

• According to preliminary data from SAMA, the trade balance is estimated to record a surplus of around SR 802.1 (US $213.9) billions in 2013, reflecting a decrease of (13.3) percent compared to last year.