Fiscal Sustainability Program

The Fiscal Sustainability Program is one of the programs to achieve Saudi Vision 2030. It aims to develop the state's financial performance and represents a medium-term financial planning mechanism to sustain the public finances and achieve a balanced budget.

The program, launched in 2016 under the name Fiscal Balance Program, has contributed to the creation of a financial system and tools that are capable of positively influencing and interacting with financial and economic shifts and changes. The program has also contributed to enhancing financial control and improving public finances through the establishment of various entities, such as the Expenditure and Project Efficiency Authority (EXPRO), the National Debt Management Center, and the Non-Oil Revenue Development Center.

The Fiscal Sustainability Program has initiated a significant shift in enabling the medium-term financial planning process. It is working on developing public finance capabilities, making them more adaptive and versatile in supporting the Kingdom's financial position. Furthermore, it ensures the stability and sustainability of the public finance situation, while maintaining economic growth rates, through diversifying the state's revenue sources, improving government expenditure efficiency, stimulating the private sector, and directing support to eligible citizens.

The program took into consideration the integration of the concept of sustainability in all issues related to sources of income and revenues that bolster public finance and economic growth. This is done through medium-term financial planning, the application of financial policies, and the reallocation of expenditure to reduce dependency on real-time oil price fluctuations. The objective is to enhance the ability to handle crises and concentrate on investments that foster robust, non-oil-dependent, and sustainable growth.

The Fiscal Sustainability Program is working on consolidating all income sources flowing into the state budget and developing an efficient and effective tax system. Its objective is to diversify and develop revenues in a structured and consistent manner as a primary and sustainable source, especially non-oil revenues. The substantial growth in non-oil revenues has significantly reduced the financial risks tied to global oil market fluctuations.

Over the span of five years, from 2016 to 2020, the Fiscal Sustainability Program has managed to impact public finance and its sustainability, in addition to helping control the deficit rates of the gross domestic product, shifting from 15.8 percent in 2015 to 2.3 percent in 2021. This bolstered the Kingdom's financial standing and enhanced its financial status to cope with external adversities, even amidst the challenging circumstances brought about by the global COVID-19 pandemic in 2020.

The program's achievements also encompassed the implementation of structural reforms in the state's general budget preparation methodology and the enhancement of its execution quality. In fact, the average annual deviation between actual total expenditure performance and budget estimates decreased significantly from an average of 16 percent during the period 2014-2016, to an average of 4 percent during the program's implementation period from 2017-2021.

Following positive outcomes in public finance, the program transitioned from achieving balance to embracing the concept of sustainability. This is done by leveraging previous achievements, enhancing the quality of financial planning, and evolving the program's orientations toward attaining the fiscal sustainability phase. During this phase, the focus is placed on setting public policies that support the goals of Saudi Vision 2030, embracing efficiency, effectiveness, and a commitment to achieving these public policies, improving the balance of payments, growing the domestic product, and generating employment opportunities for both male and female citizens.

The Fiscal Sustainability Program's numerous achievements and gains underscore its remarkable effectiveness in managing public finances. They include controlling deficit levels in public finance, bolstering the development of non-oil revenues, enhancing capital and operational government expenditure efficiency, developing government financial transactions, automating payment orders via the Etimad Platform, directing support to eligible individuals through the Citizen's Account program, and launching the Government Tenders and Procurement Law and initiating the electronic customs issues system.

The Fiscal Sustainability Program has successfully controlled and framed income flow, making it more transparent through the automation and development of procedures and laws. As a result, zakat and tax declarations in the Zakat, Tax, and Customs Authority surged to over 1.9 million declarations in 2017, marking a growth rate exceeding 700 percent. Furthermore, the commitment rate for zakat and tax declarations submission reached 95 percent in 2020, and the Zakaty Portal and application, dedicated to individual zakat, recorded over 156 million paid zakat by 2020.

This program is progress in the good management of public funds, channeling them towards budgetary enhancements and development projects. It has contributed to rectifying some economic anomalies and stimulating the optimal use of economic resources. In this context, a gradual alignment of energy prices was initiated to achieve a benchmark rate, and employment opportunities for citizens were amplified through the implementation of a financial fee on expatriate workers.

The Fiscal Sustainability Program's milestones have expanded to encompass numerous financial departments and institutions. In the domestic secondary market, trading volume increased to more than SAR70 billion in deals in 2020, compared to SAR10 billion in 2019. Moreover, 2020 witnessed a 12.4 percent expansion in the base of international investors, and 2021 saw the issuance of the first negative-yielding international bonds outside the European Union, followed by the second-largest bonds outside the European Union.

The concept of fiscal sustainability encompasses long-term procedures and solutions by implementing initiatives that contribute to increasing the level of transparency and enhancing the efficiency of public finance management. These include: developing the framework and management of overall fiscal policies, enhancing the efficiency of government expenditure, and launching the Etimad Platform to boost competition, oversight, and performance measurement. As a result, the Kingdom's ranking improved by eighteen positions in the 2019 budget transparency index, compared to one point in the 2017 survey.

The Fiscal Sustainability Program strengthens the Kingdom's efforts to develop its economy and achieve its goal of non-oil sector growth and economic diversification, a top priority and target of Saudi Vision 2030. It provides a comprehensive financial and economic framework for the medium term, aiming to achieve economic growth and financial sustainability by continuing to implement economic reforms and financial measures on both revenue and expenditure sides, and continuing the implementation of the program's initiatives.

The implementation of the program's initiatives has been reflected in the effective contribution to the overall economy. Preliminary estimates for 2023 indicate a real GDP growth rate of 3.1 percent, driven by the government's ongoing efforts to enhance the private sector's role as the primary driver of economic growth, support the growth of small and medium-sized enterprises, while continuing to implement structural reforms to diversify the economy, improve the business environment, and open up new horizons for domestic and foreign investment.

The Fiscal Sustainability Program saw the implementation of numerous initiatives to achieve its objectives, such as enhancing the efficiency of operational government expenditure, establishing the strategic purchasing unit, and Expenditure & Projects Efficiency Authority (EXPRO). It also continued to achieve its objectives by implementing the financial reforms stipulated in the program, including the Citizen's Account and stimulus packages for the private sector, in addition to applying a financial fee on expatriates, raising VAT, adjusting energy prices, increasing customs duties on certain goods related to harmful products.

The program also demonstrated its efficiency and effectiveness during the COVID-19 pandemic, which imposed various challenges and fluctuations. It contributed to monitoring and forecasting financial performance to maximize both oil and non-oil revenues, enhance the efficiency of government expenditure, and manage associated risks, all while maintaining appropriate financial reserves and a robust capacity to borrow from local and global financial markets according to the medium-term public debt strategy.