Saudi Q1 fiscal - no sign of spending cuts and a record increase in debt

GULF COUNTRIES - In Brief 05 May 2025 by Justin Alexander

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The Ministry of Finance is getting timelier with its fiscal releases, publishing Q1 today, just five weeks after the quarter end and a week before Aramco's earnings. I will include some more analysis in the weekly report, but a few quick takeaways: The decline in oil revenue was as expected, given the expiry in Q4 of the Aramco performance dividend which had provided SR30bn/quarter. Q2 oil revenue is likely to be weaker still as the oil price decline more than offsets higher output from the accelerated OPEC+ taper.Tax revenue growth slowed to 3% y/y from 7% in 2024, but is ahead of the budget, which has it flat.Spending growth of 5.4% was close to 2024, but far off the budget target of a -6.5% cut. Indeed, most of the individual items budgeted for sizable cuts actually grew. An exception was capex, down -19% y/y. Still, historically, Q1 doesn't provide much guidance on what the full year trend will look like and the impetus provided for consolidation by oil below $70 wasn't yet there in the first quarter, so we may yet see progress in the rest of the year.Debt grew by SR113bn ($31bn) or 9% q/q. This is the largest ever quarterly increase, surpassing the previous record of SR96bn at the start of Covid in Q2 2020. This more than finances the budgeted annual deficit but, in reality, a similar amount of net issuance will likely be needed during the remainder of the year. Issuance included $13bn in local placements that were not previously disclosed.The revised GDP methodology that last week boosted the 2024 nominal value by 14% (see our 2 May brief) means that the deficit was -5.1% of GDP (2024 pro rata) and the debt stock reached 29% of GDP. Under the old data series, the...