“The strategy of the de facto ruler of Saudi Arabia based on sacrificing current profits for future investments due to the radical transformation of establishing a post-oil era, but in the short term, this will lead to the government exhausting its resources,” said Karen Young, a resident scholar at the American Enterprise Institute.
Aramco, the world's largest oil company, transferred $110 billion to the government in 2020 in shareholder payments, private sector and income taxes, with 30% less than the previous year.
According to James Swanston of Capital Economics, the decline in profits from the state-owned company by 98% will affect government revenue.
He is also not convinced that additional investment in the economy will result in a significant increase in government tax revenue from other industries, according to Bloomberg.
Aramco said that it can maintain its profits, which amounted to $75 billion, and was the largest in the world last year. This resulted in the rise of the Brent Crude by 30% since December to $67 a barrel.
The wages and pensions of state workers are expected to reach 491 billion riyals ($131 billion) this year, which is about half of the total spending of 990 billion riyals.
Ziad Daoud, Chief Emerging Market Economist at Bloomberg Economics, indicated that Saudi Arabia may be able to cover salaries from crude oil revenues alone, only if oil prices remain above $60, as the country managed to raise non-oil revenues from 166 billion riyals in 2015 to 358 in 2020. A large part of this improvement is due to the settlements with a number of wealthy people in KSA in 2017, known as the Ritz-Carlton arrests, part of the Crown Prince’s anti-corruption campaign.
In 2015, it reached 358 billion riyals in 2020, a large part of this improvement is due to the settlements with a number of wealthy people in the Kingdom that began in 2017 in what was known as the arrests of the Ritz-Carlton Hotel, as part of the prince’s anti-corruption campaign.
He told Bloomberg that these adjustments are “a fifth of non-oil revenues, and they will end, and when that happens, non-oil revenues will not only stop rising but will collapse. To achieve sustainable growth, Saudi Arabia must increase productivity and increase non-oil exports.”
Last December, the Saudi government expected revenues of 849 billion riyals for the year 2021 and a fiscal deficit of 4.9% of GDP, at a time when the price of oil reached $50 a barrel, according to IMF estimates. However, the impact of the Corona pandemic on Saudi companies poses risks to the country, according to Abu Basha.
Specialists stressed that the strengthening of non-oil revenues in the future depends on moving forward with dividends from all these state-owned investments, and this increases financial vulnerability.
