Since the Saudi Crown Prince Mohammed bin Salman launched his economic plan 2030, it faced criticism by economic specialists, as well as a wide range of risks, and it harmed the resources of the Saudi state, as it was a random plan, which bin Salman is trying to adapt to all circumstances and conditions.
Researcher Karen Young, resident at the American Enterprise Institute, said in an article that the de facto prince in Saudi Arabia, Mohammed bin Salman, is forcing the largest companies in the Kingdom of Saudi Arabia, including the oil giant Aramco and Sabic Chemical Industries, to reduce dividends, most of which are directed to the state, in exchange for those companies distributing their money in the local market, which means companies spending their profits on new infrastructure and technology, in order to create job opportunities, lower unemployment rates, and accelerate the growth of the economy. This would have been the normal result of a studied plan, but this strategy means sacrificing the current profits for the sake of future investments, and this stage will exhaust the state’s oil resources in the very short term, which represents a great danger to the state, unless there is an alternative ready to replace oil, which is difficult for Bin Salman’s vision to achieve in the short term.
In the same context, the article said that the squandering of oil profits has increased due to the impact of the Corona crisis on Saudi Arabia, as life there almost been disrupted and only oil is the only resource for the state, whose prices have fallen so much, which accumulated debts to record levels.
For its part, the Saudi oil giant Aramco transferred an amount of $110 billion to the Saudi government through shareholder payments, royalties, and income tax, over the past year, representing a 30% decrease from the previous year.
James Swanston of Capital Economics argues that the state-owned company’s 98% lower dividend will affect government revenue. Swanston is not convinced that additional investment in the economy will lead to a significant increase in government taxes from other industries in the short term.
Although the Kingdom of Saudi Arabia was able to raise non-oil revenues from 166 billion riyals in 2015 to 358 billion riyals in 2020, a large part of the improvement is due to the settlements that were made with a number of businessmen and wealthy people in the Kingdom during 2017, known as the “Ritz-Carlton Arrests,” part of the crown prince’s anti-corruption campaign.
At the end of last year, the Saudi budget deficit amounted to 12% of GDP in 2020, and despite the pressure on the public budget due to the decline in payments by Saudi companies, the Public Investment Fund (sovereign fund) of $400 billion may be able to compensate for the stagnation for a short period of time.
In December of last year, revenues reached 849 billion riyals in 2021 and the fiscal deficit was 4.9% of GDP, which means that the financial conditions of the Kingdom of Saudi Arabia are still precarious.
