The detailed statement of the state's general budget

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Today, the Ministry of Finance issued a statement on the occasion of the issuance of the state's general budget for the fiscal year 1439/1440 AH, which reads as follows: :// Statement of the state's general budget for the fiscal year 2018 AD // The Ministry of Finance is developing policies to prepare the state's general budget, and this statement comes To draft the state’s general budget for the fiscal year 2018 AD to reflect the ministry’s policy in its project to develop the state’s general budget and put it within a medium-term framework that takes into account the financial and economic dimensions. This document includes the performance of the general budget and the most prominent economic and financial developments for the fiscal year 2017 AD, and a presentation of the most prominent local and global economic developments expected for the next year 2018 AD, indicators of the budget for the next fiscal year 2018 AD and expectations in the medium term until 2023 AD, which includes a presentation of the developments of the fiscal balance program. In addition, the statement reviews the most important initiatives and reforms implemented by the government to achieve financial sustainability and economic growth, the most important economic risks that public finances may face in the medium term, and the financial and economic policies to confront them. It also reflects the quest for more disclosure and transparency in public finances. It should be noted that the financial data included in the statement are classified according to the Government Finance Statistics Manual (GFSM 2014), which is issued by the International Monetary Fund as a unified global classification. First: An overview of the financial and economic framework of the budget. The Kingdom of Saudi Arabia is going through an important transitional phase in its history at all levels. : economic, social and cultural under the direct guidance and supervision of the Custodian of the Two Holy Mosques and His Highness the Crown Prince - may God protect them - where the "Kingdom's Vision 2030" was launched in April 2016 AD and a number of its executive programs during the years 2016 AD and 2017 AD. The vision and its executive programs aim to diversify the economy, achieve financial and economic stability, stimulate the growth of non-oil economic activity, increase the contribution of the private sector as an engine of growth, increase job opportunities for citizens of both sexes in the labor market, improve the standard of living of citizens, and achieve a prosperous and vibrant society. Implementing the Kingdom’s Vision 2030, the Fiscal Balance Program was launched with the aim of achieving public finance sustainability, as the Ministry of Finance adopted a set of programs and initiatives that include the implementation of a medium-term public finance framework that sets the budget ceiling and spending ceilings at the level of government agencies, and work on the optimal allocation of resources and managing them efficiently and effectively And improving the process of collecting state public revenues, with measurable and follow-up objectives, in addition to improving the ability to address financial risks, improving the quality and accuracy of financial accounts, enhancing transparency, making optimal use of state assets and benefiting from new financing mechanisms and means.

In order to achieve these objectives, a number of units and offices have so far been established to manage the various programmes, including: the Fiscal and Macro Policy Unit, the Public Debt Management Office, the Capital and Operational Spending Rationalization Office, the Fiscal Balance Program Office, the Financial Sector Development Office, and the Non-oil Revenue Development Unit, in order to keep pace with the transformation phase and contribute to the implementation of the Kingdom’s Vision 2030 programs. These units, in addition to the treasury system, which includes the Budget and Organization Agency, the Finance and Accounts Agency, and the Revenue Agency - in coordination with the various departments in the Ministry and other government agencies - implement Ministry strategy referred to above. The ministry also launched a number of initiatives, including: 1/ Developing the management and sustainability of public finances, 2/ Activating the state's unified account to improve monetary control and liquidity management, 3/ Developing the preparation of the state's general budget, 4) Developing the government competition and procurement system, 5/ Transforming from The monetary basis to the accrual basis in government accounts 6/ Developing financial control. These initiatives will raise the efficiency of preparing the annual budget, the accuracy of estimates, the development of financial control, and performance measurement. The economic framework: The real GDP growth rate in 2018 is expected to be about 7. 2%, assuming the implementation of approved policies to improve the performance of economic activity, especially those aimed at enhancing the performance of non-oil activities, compared to a negative growth rate of 5. 0% for the year 2017 AD, due to the decline in oil production, while the non-oil sector grew in the first half of the year 2017 AD by about 6. 0%, and is expected to rise to about 5. 1% for the total year with the improvement of economic performance indicators in the second half of the year 2017 AD. The cost of living index achieved negative growth until the end of October of the current year 2017 AD, with an average of 3. 0-% year-on-year, compared to an average growth of 8. 3% until October of last year 2016, and the cost of living index is expected to increase by 7. 5% in 2018, with the improvement of economic activity, the application of some revenue measures and the correction of energy prices, and the current account in the balance of payments achieved a surplus of about 4. 14 billion riyals, or the equivalent of 5. 0% of the nominal GDP during the first half of 2017 AD, and it is expected to achieve a higher surplus during the second half of the current year, with this surplus continuing in 2018 AD as a result of the increase in the value of oil exports and the rise in the average oil price.

According to what was announced, a number of measures aimed at revitalizing the performance of the economy will be implemented during the next year, including: implementing investment stimulus packages, continuing to pay any financial obligations to the private sector within a maximum of sixty days of receiving them with full procedures to the Ministry of Finance, as well as continuing efforts to encourage And facilitating investment procedures in the Kingdom and improving the level of government services, and implementing projects in the construction, tourism, culture and entertainment sectors, in addition to implementing privatization programs that are expected to provide new opportunities for private investment growth and generate more job opportunities. Work to develop a framework and system for partnership between the public and private sectors. The government will continue to implement initiatives to limit the negative effects of reforms on eligible citizens, including the implementation of the Citizen Account Program, which is one of the important initiatives to help those eligible for subsidies face the additional costs that may result from correcting energy prices and value-added tax levels by redirecting subsidies to the most deserving groups. The citizen account budget should be around 32 billion riyals in 2018. The financial framework: The deficit in the 2017 budget is expected to reach about 9. 8% of the gross domestic product, with a significant decline from the budget deficit in 2016, which amounted to about 8%. 12% of the GDP, as revenues are expected to increase by 34% to reach 696 billion riyals, as a result of the increase in oil and non-oil revenues, while public expenditures increased by 6. 11% to reach 926 billion riyals. All arrears of government agencies have been paid to the private sector, and the government has implemented a number of reforms aimed at developing revenues and raising the efficiency of expenditures in order to reduce the budget deficit and control the growth of public debt, and has started implementing the first phase of correcting energy prices and amending a number of fees, including: Fees for visas and traffic violations in 2016 AD, the application of selective tax in June 2017 AD on some commodities such as tobacco and its derivatives, soft drinks and energy drinks, and the application of a fee for expatriates in July 2017 AD. To improve performance, the Ministry of Finance launched a set of electronic services and platforms to expedite the payment of dues such as Inquiries about payment orders, the "Etimad" platform, and the service of raising financial and other claims to ensure the implementation of payment of dues within sixty days for claims that have completed the procedures, and to ensure that there are no claims due to the private sector that have not been dealt with and paid without delay.

The ministry has also worked to develop the government competition and procurement system to meet the needs of the public and private sectors, and contribute to raising the efficiency of public spending (operational and capital) and achieve the best value for public money, in addition to enhancing integrity and competition, and preventing the influence of personal interests to protect public money and support Economic development by supporting local content and small and medium enterprises, in line with the objectives of the Kingdom’s Vision 2030 in accordance with international best practices. Budget 2018 In the 2018 budget, the government aims to reduce the budget deficit to about 3. 7% of the nominal GDP, against an expected deficit of about 9. 8% of the GDP in 2017. The increase in total revenues in the 2018 budget is estimated at 6. 12% compared to what is expected to be collected in 2017 AD, while non-oil revenues will increase by about 14% as the government will continue to implement the initiatives of the Fiscal Balance Program in 2018 AD, including: Starting to apply the value-added tax in January at a rate of 5% in light of the unified agreement between the countries The Cooperation Council for the Arab States of the Gulf, and the implementation of the second phase of correcting energy prices, which aims, in the medium term, to gradually bring these prices to reference prices, and the application of the second phase of the financial compensation for expatriates, in addition to a number of initiatives and reforms aimed at developing non-oil revenue sources and raising the efficiency of public expenditure. At the same time, the 2018 budget includes an increase in public expenditures by about 6. 5% compared to 2017, as a result of an increase in government investment expenditures (capital expenditures) by about 6. 13% to finance the initiatives and projects of the vision programs, including housing projects and infrastructure development, to stimulate economic growth and generate more job opportunities for citizens. The financial framework in the medium term: In light of economic developments and economic growth targets, the timetable for the financial balance program has been reviewed so that the work To achieve fiscal balance in 2023 instead of 2020, by gradually implementing the measures and reforms included in the program to ensure that they do not negatively affect economic growth and to avoid correcting and raising energy prices significantly and to reduce inflation, with continuous review to ensure the achievement of goals, and it is expected that this will not have an impact Negative on plans to sustain and strengthen the state of public finances, given the strong financial position of the Saudi economy and an appropriate size of reserves that allow it to withstand external shocks.

Second: Prospects for the high economy In October of this year, the International Monetary Fund raised its forecasts for the growth of the global economy, as the Fund expected that the growth would reach about 6 percent. 3% in 2017, and 7. 3% in 2018 compared to 5. 3% and 6. 3%, respectively, according to forecasts issued in April of this year. The following is a table showing the Fund's expectations for the economic performance of the most prominent global economies. Global indicators of gross domestic product and inflation (percentage) 2016 2017 2018 World Economy 2. 3 6 . 3 7 . 3 economies of developed countries 7. 1 2 . 2 2 Emerging market economies and developing countries 3 . 4 6 . 4 9 . 4United States 5 . 1 2 . 2 3 . 2 China 7 . 6 8 . 6 5 . 6 Japan 1 5 . 1 7 . 0 Inflation in the economies of developed countries 8. 0 7 . 1 7 . 1 Inflation in emerging markets and developing countries 3. 4 2 . 4 4 . 4In the United States, the International Monetary Fund expects fiscal policy to be less expansionary compared to its previous forecast, as it lowered its growth forecast by 1.0%. 0% for the year 2017 AD and 2. 0% for 2018. However, the economic growth rates of the United States are expected to rise as a result of the approval of the tax cuts project, which will be reflected in the increase in the pace of raising American interest rates. The International Monetary Fund also raised its expectations for the growth of the euro area in light of the presence of positive economic indicators in addition to Some political risks receded. It also raised its forecast for the growth of Japan and China, which are among the most important trading partners of the Kingdom, to reach 5% for Japan. 1% in 2017 and 7. 0% in 2018 and 8% for China. 6% and 5. 6% for the same period.

On the other hand, the IMF indicated that the global economy still faces serious risks in the medium term, as it is expected that the contractionary monetary policies of some advanced economies, and in particular the gradual rise in interest rates on the US dollar, will put pressure on growth rates in the global economy, Perhaps more than expected. He also indicated that further restrictions on trade policies would harm the global economy. In addition to the political tensions in many regions. He explained that the inflated assessment of global markets, which comes in conjunction with a very low rate of volatility; It does not indicate future confidence in the markets, and indicates a possible future correction. For its part, the World Bank warned of the same risks that the fund mentioned above, as the World Bank indicated in its report on the global economy issued in June 2017 that the growth levels The world economy will be supported by the expected economic growth of the United States of America, and supported by the high demand and exports in the eurozone countries and Japan. He also mentioned that the negative impact of the drop in oil prices on the budgets of some oil-exporting countries began to fade with the return of oil prices to a relatively high rate, but he stressed the importance of continuing economic reforms and developing trade policies to attract foreign investments. It has oil prices this year under the influence of various factors, whether positive or negative. Prices have gone up. The good global economic growth rates and the decrease in oil supply that resulted from the agreement concluded by the OPEC countries and non-member countries outside it contributed to reducing the surplus in the commercial stocks of the Organization for Economic Cooperation and Development (OECD) from January to October 2017 by 200 million barrels, while remaining About 150 million barrels of surplus. This achievement contributed to enhancing the positive future expectations of the oil markets and investor confidence, while it negatively affected, albeit to a lesser extent, the increase in production in Libya, Nigeria and the United States, and the non-compliance of some countries in the agreement. The balance of positive factors was evident in the second half of the year, as Brent crude prices gradually increased from $44 a barrel in June to $65 a barrel in December, i.e. more than $20 a barrel. While most expectations indicate a continued recovery in the oil markets Based on the continued success of the agreement concluded between OPEC countries and non-member countries outside it, these expectations remain subject to the extent of commitment to implement the agreement, the continuation of global economic growth as well as the realization of supply and demand expectations, in addition to the extent of success in addressing arbitrary policies against fossil fuel products.

Referring to the latest data of the OPEC Secretariat and the International Energy Agency (IEA) as well as the US Energy Information Administration (EIA), we find that estimates and projections indicate that the increase in the expected growth rate in global demand during 2018 Estimated at about 5. 1 million barrels per day. While there is a clear discrepancy in the expectations of non-OPEC supply growth (which also includes liquids other than oil from OPEC countries) among the three sources, which range between 920 thousand barrels per day and 63. 1 million barrels per day. In this context, it is expected that oil prices will continue to rise in the future, and this is conditional on the continuation of success in the trend towards market equilibrium, taking into account seasonal differences, as the demand in the first half is lower than in the second half, which in turn is reflected in the relative difference in prices between the two halves. Any interruption in supplies from major producing countries due to unrest could lead to a rise in prices from their current levels, especially if this decline is significant and lasts for a long time. Trade exchange: Japan became, for the first time, the first destination for the Kingdom’s exports in 2017, while China occupied the second place. . On the other hand, China still ranks first in imports, followed by the United States of America. The top five destinations for Saudi Arabia's exports (billion Saudi riyals) until the third quarter until the third quarter 2016-2017 Change Japan 324 . 49 848 . 71 46% high China 064 . 56 486 . 69 24% high India 149 . 46 623 . 53 16% HighUnited States of America 921. 45 101. 53 16% high, South Korea 611. 41 343 . 52 26% high The five most important sources of imports for the Kingdom of Saudi Arabia (billion Saudi riyals) until the third quarter until the third quarter 2016-2017 percentage change China 103. 58 187 . 56 3 . 3-% low in the United States of America 549. 55 141 . 50 7 . 9- Low in the United Arab Emirates 476. 21 577 . 23 8 . 9% high, Germany 487. 26 696 . 21 1. 18-%, low in India 141. 15 129 . 15 1. 0 - % low

Third: Economic and financial developments for the year 2017 A.D. 1 - Economic developments - the real sector According to the data of the General Authority for Statistics, the real GDP in the first half of this year achieved a negative growth of about 8%. 0%, and according to estimates by the Ministry of Economy and Planning, growth is expected to continue negative by about 5.0%. 0% for the year 2017. This negative growth is attributed to the decline in the real oil domestic product, which recorded a negative growth of 2% during the first half of this year. Growth is expected to continue declining until it reaches 3. 4% by the end of this year as a result of the Kingdom’s commitment to reduce its oil production in accordance with the agreement between the OPEC countries to reduce production in November 2016, which was extended until the end of 2018. It is also expected that the positive growth in real non-oil GDP will help mitigate the decline in the total output. real local. It is estimated that the non-oil GDP will grow in 2017 by 5%. 1%, as it recorded an actual growth until the middle of this year by 6. 0% according to the data of the General Authority for Statistics, and this is due to the improvement in the growth of some economic sectors such as the manufacturing sector and the services sector, despite the decline in growth in other sectors such as the building and construction sector, which was shown by the actual performance until mid-2017.// Chart No. 1/ With regard to the nominal gross domestic product, it is expected to record a positive growth of about 1. 6% at the end of 2017, driven by the rise in oil prices in global markets, as the nominal oil domestic product is expected to rise by about 2.5%. 20%. The nominal non-oil GDP is also expected to grow by about 4.0%. 1%, taking into account the decrease in the general level of prices represented in the negative cost of living index for this year. On the other hand, some of the main economic performance indicators during the third quarter of 2017 AD showed some improvement in economic growth, especially in the main indicators of private consumption, including sales growth Through points of sale, an increase of 8. 9% year-on-year, compared to an average growth of 7. 5% for the first half of the year. On the other hand, the growth of cash withdrawals from automatic teller machines decreased in the third quarter by 2. 2% year-on-year, compared to an average decrease of 6. 5% for the first half of the year, according to data from the Saudi Arabian Monetary Agency, in addition to the improvement in the performance of corporate profits in a number of sectors such as petrochemicals and the banking sector.

// Chart No. 2 // The labor market bulletin issued by the General Authority for Statistics also indicates that unemployment rates for Saudis amounted to about 8. 12% until the end of the first half of the year compared to 3. 12% at the end of 2016 AD. Inflation ratesAccording to the actual data of the General Authority for Statistics, the index of the cost of living declined on an annual basis, by an average of 3. 0 -% until October 2017, compared to a positive growth of 8. 3% in the same period of the previous year, and according to the expectations of the Ministry of Economy and Planning, the cost of living index will record a negative growth of 1. 0% at the end of 2017, compared to a positive growth of 5. 3% in the previous year, and it is expected that private and government consumption in the last quarter of this year will contribute to reducing the rate of negative decline in inflation. External SectorThe Saudi Arabian Monetary Agency's estimated balance of payments data indicates a positive improvement in the current account until mid-2017. It achieved a surplus of 4. 14 billion riyals, driven by the improvement achieved in the balance of goods, services and primary income, which recorded a surplus of 1. 54 and 7. 30 billion riyals, respectively, as a result of the recovery in oil prices. As for the secondary income balance - which includes government and private transfers - it recorded a deficit of nearly 4. 70 billion riyals, paid for by workers’ transfers, which amounted to about 7. 62 billion riyals during the first half of 2017. It is expected that the current account will continue to register a surplus until the end of the current year, equivalent to 5. 2% of the nominal GDP. The data of the General Authority for Statistics indicate that the Kingdom’s total merchandise exports until the end of September of the current year 2017 amounted to about 591 billion riyals, an increase of 3. 20% compared to the same period of the previous year 2016, as a result of the increase in the value of oil exports by 3. 26% for the same period. As for non-oil exports, their value for the same period of the current year 2017 AD amounted to about 136 billion riyals, registering an increase of 2. 4%. With regard to merchandise imports until the end of September of 2017, they amounted to 364 billion riyals, a decrease of 7. 8% compared to the same period of the previous year, due to the decrease in imports of consumer and intermediate goods.

The money sector (M3) recorded a slight decrease for the month of October 2017 by 6. 0% on an annual basis, according to data from the Saudi Arabian Monetary Agency, resulting from a decrease in time and savings deposits and cash circulating outside banks, despite the high growth in demand deposits by 7. 3%. On the other hand, bank liabilities to the private sector decreased during the month of October to 5. 1% compared to October 2016. While the liabilities of banks from the public sector during the month of October of this year increased by 29% compared to the same month of the previous year, bringing the total liabilities to 292 billion riyals, driven by government bond and sukuk issuances and the growth of bank credit provided to public institutions. With regard to the movement of bank credit, it has The total credit for economic activities amounted to 1408 billion riyals, which represents a decrease of 5%. 1% for the third quarter of 2017 compared to the same period of the previous year. This decline was due to a decrease in the credit movement of each of the building and construction sector, the industrial and production sector, and other sectors, by rates amounting to 7. 7%, 8%, and 7. 2%, respectively, and one of the reasons is due to the government's commitment to paying contractors and suppliers on time, and thus the decrease in the credit need. The total consumer loans for the third quarter of this year amounted to about 339 billion riyals, which represents a decrease of 4 percent. 1% compared to the same period of the previous year, driven by a decrease in consumer loans for furniture, durable goods and health care. While credit card loans amounted to about 6. 11 billion riyals, an increase of 3. 1% compared to the same period. According to the latest published data from the Saudi Arabian Monetary Agency, total real estate loans from commercial banks amounted to approximately 223 billion riyals at the end of the second quarter of 2017, with an annual growth rate of 4. 16% is driven by government support to help borrowers benefit from housing programs, and the percentage of borrowing for both individuals and companies represented 51% and 49%, respectively, of the total real estate loans from commercial banks. While real estate loans by real estate finance companies at the end of the third quarter of 2017 amounted to 14 billion riyals, a growth of 8% over the same period of the previous year, as individuals’ borrowing accounted for 82% of the total real estate loans from real estate finance companies. 2 - Financial Developments The budget deficit for the current fiscal year 2017 is expected to be about 230 billion riyals, equivalent to 9. 8% of the gross domestic product, compared to 8. 12% of the GDP in 2016, which confirms that the fiscal policy in the Kingdom is on the right track to achieve its medium-term goals. At the same time, the expected deficit is higher than the estimated deficit in the budget (198 billion riyals), as total revenues increased by 1% over the budget estimate, and total expenditures exceeded the budget estimate by 4%.

A- Revenues: The year 2017 witnessed many financial developments on the revenue side, represented in the start of implementing the reforms approved in the fiscal balance program that was launched in December 2016, as it includes a list of economic procedures and reforms, including: visa fees, municipal service fees, And the financial compensation for expatriates, and the application of selective taxes (tobacco and its derivatives, soft drinks and energy drinks). It is expected that the total revenues in 2017 will reach about 696 billion riyals, with an increase of 34% compared to the previous year, as a result of the increase in oil prices, which contributed to a growth of about 32% in Oil revenues during the same period and the application of a number of reform measures to increase non-oil revenues by 38%, and it is expected that the total revenues will achieve an increase of 1% over the estimated budget. The tax item on income, profits and capital gains is expected to decline by 6% compared to the previous year, due to the decline in revenues collected from the income tax of foreign companies, and the withholding tax for non-nationals. Residents, and zakat as a result of the slowdown in economic performance. It is also expected that the item of taxes on income, profits and capital gains will decrease compared to the estimated budget by 23%. As for taxes on goods and services, it is expected that they will reach about 47 billion riyals for the year 2017, an increase of 54% compared to the previous year. The increase came as a result of the implementation of a number of economic reforms, the most important of which is the excise tax and the adjustment of visa prices. Despite this increase, it is expected that by the end of 2017 it will decrease by 16% from the estimated budget, due to the delay in applying the tax on excise goods. It is expected that That taxes on international trade and transactions (customs duties) be recorded at about 21 billion riyals by the end of 2017, an increase of 3% compared to the previous year and a decrease of 31% from the estimated budget. 7 . 8% compared to the same period in the previous year.

- Other revenues: Other revenues for the year 2017 are expected to amount to about 599 billion riyals, an increase of 37% compared to the actual revenues of the previous year, and an increase of 7. 4% compared to the estimated budget, including oil revenues, which are expected to reach about 440 billion riyals, an increase of 32% compared to the previous year. The average oil production was 9. 9 million barrels per day, and the average price of Brent oil until November of 2017 was 3. 53 dollars a barrel, compared to 5. $43 a barrel during the same period in 2016. Oil revenues are expected to decrease by 8% from the budget estimate as a result of postponing the implementation of the planned energy price correction for this year.// Chart No. 3 //B Expenditures: Total expenditures are expected to reach For the current year 2017, about 926 billion riyals, equivalent to 36% of the gross domestic product, exceeding the estimated budget by about 4% affected by the disbursement of workers’ compensation and the return and disbursement of allowances retroactively, as well as the addition of appropriations for some projects and programs to comply with the payment of dues to suppliers and contractors from the sector. within 60 days, with an increase of 6. 11% over the actual disbursement of the previous year, as well as to increase spending on other expenses, to increase spending on expropriation compensation for the Prophet’s Mosque expansion project, and to increase spending on social benefits by about 4. 20%, as capital expenditure increased by about 6. 3%, despite the decrease in spending on the purchase of goods and services by 7. For these reasons, spending on the education sector, the public administration sector, the health and social development sector, the municipal services sector, the military sector, and the security and administrative areas sector is expected to exceed the estimated budget by 14%, 13%, 11%, 2%, and 17 percent and 14 percent, respectively, bringing the total expenditure on these sectors until the end of the current fiscal year to about 228, 30, 133, 49, 224, and 110 billion riyals, respectively. On the other hand, it is expected that spending will decrease on the basic equipment and transportation sector, the general items sector, and the economic resources sector, bringing the total spending on them to about 29 billion, 85 billion, and 39 billion, respectively.

// Graph No. 4 //// Graph No. 5 // C- Debt and Finance: The Ministry of Finance continued to follow a policy of balance between debt issuance and withdrawals from government deposits and the state’s general reserve to finance the budget deficit during the current fiscal year 2017. The ministry has also diversified its domestic and foreign issuances by issuing sukuk and bonds worth about 134 billion riyals, of which about 6. 53 billion riyals local bonds and 7. 33 billion riyals in foreign bonds and 8. 46 billion riyals in foreign bonds, at the same time, about 100 billion riyals were used from the balances of the government and the state’s general reserves. Government bonds worth 5 . 8 billion riyals and paying debt payments of about 4 billion riyals. By the end of 2017, the total public debt is expected to reach 438 billion riyals, which is equivalent to about 17% of the gross domestic product, compared to 317 billion riyals, which is equivalent to about 1. 13% of the GDP for the previous year 2016. Where the Ministry of Finance, represented by the Public Debt Management Office, worked on developing a medium-term strategy for public debt, including appropriate options for financing at the best costs with risks that are consistent with the financial policies of the Kingdom. Public finance developments (billion riyals, unless otherwise stated) 692 696 9 . 33% of taxes 82 121 97 6. 18% taxes on income and profits 15 18 14 6 . 5-% and capital gains taxes on goods and services 30 56 47 3. 54% of taxes on trade 20 31 21 3. 3% and international transactions other taxes 17 16 15 6. 6-% of other revenues 437 571 599 8. 36%

Actual Budget Change Expectations 2016 2017 2017 Annual Expenditures Total Expenditures 830 890 926 6. 11% of expenses (operating expenses) 696 716 746 2. 7% of workers' compensation 409 412 440 6. 7% Goods and services 150 153 135 1. 10-% financing expenses 5 9 9 9. 81% subsidies 7 7 7 9 . 1-% grants 5 3 3 2. 39-% of social benefits 41 37 44 3. 6% Other expenses 79 95 108 7. 36% of non-financial assets 134 174 180 3. 34% (capital expenditures) budget deficit / surplus budget deficit / surplus 311 - 198 - 230 - 9. 25% as a percentage of the gross domestic product. 12-7%. 7-9%. 8 - % - Religion and assets Religion 317 - - 438 5. 38% as a percentage of the gross domestic product 1. 13% - - 0. 17% - Government deposits 683 - - 583 6. 14% of the Arab Monetary Agency as a percentage of the gross domestic product 2. 28% - - 7. 22% - -

Institutional reforms to develop public financial management During the year 2017, the Ministry of Finance took a number of initiatives and institutional reforms to develop public financial management, which included completing the application of the classification of the public budget according to the International Manual for Government Finance Statistics (GFSM 2014) and developing the institutional system responsible for preparing the elements of fiscal policy Through the establishment of specialized units to support the decision-making process and improve the efficiency of public financial management. The units that were recently created in the Ministry of Finance included the fiscal and macro policies unit, the public debt management office, and the non-oil revenue development unit. In addition to the joining of the Capital and Operational Expenditure Rationalization Office, the Strategic Procurement Unit, and the Fiscal Balance Program Office to be under the supervision of the Ministry of Finance. Managing public finances in the medium term. This unit in the Ministry of Finance is a strategic and advisory unit that aims to improve the process of setting and following up the performance of financial and economic policies and financial planning using the best internationally recognized methods and practices. The most important tasks of the unit are to conduct financial and economic analysis and forecasts, provide advice and propose policies that ensure the soundness and sustainability of public finances in the medium term, and achieve the development goals in the Kingdom’s Vision 2030. During the year 2017 AD, the unit prepared a financial and economic framework for the Kingdom’s economy in the medium term, which included the preparation of a base Detailed financial and economic data, and the preparation of the framework using globally recognized economic models that are similar to international best practices and with technical support from the main international institutions. in the medium term. It also provides a mechanism for assessing the financial and economic situation in light of better existing policies and optimal financial planning, identifying the extent of the need to intervene with fiscal policy tools to achieve financial and economic goals, and identifying and managing the most important financial and economic risks in the medium term, within a framework consistent with macroeconomic performance. Evaluates the effects of continuous domestic and international economic and financial changes on financial and economic performance. The unit also prepares financial and economic reports. PAL, along with other sectors of the Ministry, prepared the budget statement report and quarterly reports on the performance of public finances, which the Ministry of Finance published for the first time, starting from the first quarter. for the year 2017, with the aim of raising the level of transparency and increasing financial disclosure.

2- Public Debt Management OfficeIn the fourth quarter of 2015, the Public Debt Management Office secures the Kingdom’s financing needs at the best possible costs in the short, medium and long term with risks that are compatible with the Kingdom’s financial policies, and achieves the sustainability of the Kingdom’s access to various global markets and pricing Fair. The Public Debt Management Office accomplished the following in 2017: - In April 2017, the Public Debt Management Office registered public financing instruments at the Securities Depository Center of the Capital Market Company (Tadawul), and appointed a payment agent from the private sector. This will be followed, God Almighty willing, by appointing primary dealers, which will help the Public Debt Management Office pave the way for listing public financing instruments on the Tadawul platform as part of the process of developing the debt market in the Kingdom, in both its primary and secondary parts. In April 2017, which more than doubled the previous largest sovereign sukuk issuance in the world. The offering, valued at approximately $9 billion, consists of two tranches, a 5-year tranche of $5.5 billion. 4 billion US dollars, due date on April 20, 2022 AD, and a return of 894. 2% annually at the time of its issuance, and another tranche for a period of 10 years at a value of 5. 4 billion US dollars, due date on April 20, 2027 AD, with a return of 628. 3% annually at the time of issuance. This issuance attracted a lot of investors, as it recorded an average increase in coverage of 7. 3 times, and a lot of demand from investors who prefer this type of financing tools, who represented 34% of the final investor base for this issue. These issuances are essential for the banking sector in the Kingdom due to the regulatory requirements of Basel III and the liquidity management constraints corresponding to this type. Two other elements helped the government meet these requirements: the wide acceptance of sukuk by a large number of members of the Sharia committees of financial institutions and councils, and its innovative structure, which demonstrated the Kingdom's leadership and sophistication in this aspect by designing a structure that no other sovereign government used when it was issued. . This issuance also attracted large international investors who were not previously known for their large investments in sukuk. The Ministry also managed the second international issuance of bonds in September 2017. 12 billion US dollars from three tranches: 3 billion US dollars for a period of 5 years, the maturity date is March 4, 2023 AD, and the return is 009 . 3% annually at the time of issuance, and a second tranche of $5 billion for a period of 10 years, due date on March 4, 2028, with a return of $762. 3% annually at the time of issuance. And a third tranche for $5. 4 billion US dollars, the maturity date is October 4, 2047 AD, and the return is 663 . 4% annually at the time of issuance. The successful offering came after a marketing campaign, in which the Public Debt Management Office met more than 130 investors around the world, 90% of these investors participated in the record of this issuance, and this rate was higher than 74% in the first issuance in 2016. The strong demand for this offering was evident in peak demand of around $40 billion, which allowed the Kingdom to cut final pricing by 20 basis points for all tranches.

The Ministry was able, through the Public Debt Management Office, in July 2017, to arrange the local sukuk program in Saudi riyals, and to qualify commercial banks and government agencies to invest in government sukuk issuances. The Ministry of Finance, represented by the Public Debt Management Office, issued four issues within the local sukuk program for maturities of 5, 7, and 10 years. The fourth issue was reopened in November 2017 to reduce the number of issues and increase the liquidity of one issue. The total value of the four issues amounted to about 54 billion riyals. Fourth: Prospects for the local economy: Most of the macroeconomic indicators are expected to improve in 2018 compared to the previous year, driven by a budget that focuses on expansionary investment spending and economic reform programs. The Ministry of Economy and Planning estimates indicate a real GDP growth of about 7. 2%, primarily driven by an increase in real non-oil GDP by about 7. 3%, and the private sector will be a major driver of that increasingly important role for the non-oil sectors, as it is estimated that the value of its real investments will increase at a growth rate of about 3.0%. 3%. The government sector will also play an important role in the growth of the non-oil sector as a result of the direct impact of the increase in government spending by about 6.0%. 5% to implement current reforms in addition to future economic reforms that include stimulating investment, raising investor confidence, allocation and directed capital spending based on economic contribution and vital projects, developing new sectors, raising productivity levels, and other initiatives that aim to achieve the Kingdom's Vision 2030. Economic activity will be concentrated in key sectors such as the manufacturing sectors, the construction sector, which have high contributions to GDP growth, in addition to the mining sector, the financial services sector, insurance, real estate, business services, and the communications sector. Medium-term estimates indicate that the real GDP growth rate will exceed 8%. 2%, and non-oil real GDP growth is expected to exceed 2. 3%, by the end of 2020. This is expected to record a growth of nominal domestic product 2 . 3% next year, and to grow by about 7. 3% in 2020 AD. It is also expected that stimulus and government capital spending will contribute to an increase in real economic growth rates in 2018 AD and neutralize the effects of public finance sustainability policies. Although public finance sustainability policies that include raising spending efficiency and increasing non-oil revenues through the implementation of value-added tax and proceeding with correcting energy prices may negatively and temporarily affect economic activity, programs such as the Citizen Account Program and private sector stimulus initiatives will contribute To a large extent, the impact of these measures is neutralized, and stimulus initiatives and programs will focus on improving the growth of real non-oil GDP, as the increase in government capital spending for the year 2018 is estimated at 6.5%. 13% compared to the previous year.

The Ministry of Economy and Planning expects private investment and consumption to achieve positive growth rates in 2018. Given the expected pivotal role of the private sector in achieving Vision 2030, it is estimated that private investment growth will achieve increasing positive growth rates starting from 2018 AD until 2020 AD, when private investment growth rates are expected to increase by about 3%. 3% in 2018, to reach about 5. 3% in 2020 AD, after a significant decrease in 2017 AD. On the other hand, it is expected that the growth rate of private consumption will be about 4. 0% in 2018AD, before rising again to about 2% in 2020AD. After the decline in the cost of living index in 2017AD, it is expected that it will rise in 2018AD, with the payment of some economic reform programs such as the implementation of the value-added tax in January 2018 AD at a rate of 5%, in addition to correcting energy prices, and proceeding with the application of the second phase of the financial compensation for expatriates, and it is expected that the inflation rate in 2018 will reach about 7. 5% before it began to decline to about 2% in 2020 AD. However, activating the citizen account program will limit the negative effects on the standard of living of citizens. In terms of the labor market, it is expected that the unemployment rate among Saudis will decrease in 2018 AD compared to the previous year. Estimates from the Ministry of Economy and Planning indicate a decrease in the unemployment rate among Saudis to about 12% in 2018. The unemployment rate among Saudis continues to decline gradually, supported by economic growth. And raising the financial compensation for expatriates, in addition to the replacement programs and various initiatives, until it reaches about 6. 10% in 2020 AD. In addition, these rates may decrease to a greater degree in conjunction with the achievement of the desired results from the initiatives aimed at replacing citizens in a number of economic sectors and activities. The expectations for the year 2018 depend on several factors, the most important of which are the performance of the oil market, the accuracy of implementation, and the synchronization between economic reform programs. While some reforms may positively affect the sustainability of public finances and diversify sources of income, such as value-added tax, financial compensation for expatriates, and energy reform programmes, they may negatively affect economic growth unless they coincide with economic stimulus programs such as activating the citizen account, stimulus packages and government capital spending. Therefore, the expectations for the year 2018 AD took into account the accuracy of implementation and the synchronization between the various initiatives of the economic reform programs.

Estimations of economic indicators in the medium term (2017-2020 AD) Actual forecasts Estimates for 2016 2017 2018 2019 2020 Growth rates of economic indicators (%) GDP growth 7. 15 . 0 - 7. 2 7 . 2 8 . 2 Non-oil real GDP 2. 0 5 . 1 7 . 3 1 . 3 2 . 3 Non-oil real nominal GDP growth 2. 1 - 1. 6 2 . 3 2 . 4 7 . 3 Gross Domestic Product 7 . 1 4 . 1 1 . 0 2 . 2 6 . 1 Non-oil nominal real private consumption 2. 2 2 . 1 4 . 0 6 . 19. 1 real private investment 2 . 0-0. 63 . 3 4 . 3 5 . 3 The unemployment rate for Saudis 3. 12 6 . 12 0 . 12 2 . 11 6 . 10 inflation 5. 3 1 . 0 - 7. 5 9 . 1 . 20

Fifth: Public Finance Policies in the Medium Term (Developments of the Fiscal Balance Program) The Fiscal Balance Program 2017-2020, approved in December 2016, represents a medium-term financial planning mechanism to sustain the public finances and achieve a balanced budget. The program is based on 5 main axes: 1- Raising the efficiency of capital and operational spending. 2- Correcting energy and water prices. 3- Developing other government revenues. 4- Redirecting subsidies to beneficiaries (the Citizen Account Program). 5- Growing the private sector. The fiscal balance program was reviewed during 2017 in the light of economic developments as a medium financial framework that is updated and published annually as an essential part of the annual budget statement that includes initiatives and policies to achieve goals and governance to ensure effective implementation. Within the framework of following up the development of the actual local and global economic performance during the year, And the financial and economic impacts of some of the implemented initiatives, and the expected estimates of some of the planned initiatives, and the growth targets of economic activity in the medium term, which is a major goal of Vision 2030. The program timetable has been reviewed and amended by extending the implementation period of some reforms to achieve financial balance by 2023 AD instead of 2020 with the aim of Not to negatively affect the growth rates of non-oil output, which is one of the main objectives of Vision 2030.

Program Implementation Mechanism: The Fiscal Balance Program has set ambitious goals that require major changes in fiscal policy to be achieved. The following four strategic pillars have been identified: A- Establishing the principle of financial responsibility in all government agencies: allocating a budget that is consistent with the strategic priorities of these agencies, and setting up a system that encourages accountability and full ownership of financial targets at all levels of the entity. B- Macro financial and economic planning: directing Fiscal policy towards achieving financial and economic sustainability and stimulating effective decision-making to manage the budget while providing an integrated picture of debts and reserves. Objectives of the desired financial budget through the optimal utilization of state resources. This is expected to contribute to reducing expenditure over budget. This pillar includes two main initiatives: Enabling government entities to sustain financial balance: This initiative seeks to strengthen performance management mechanisms to ensure that entities adhere to financial targets, i.e. budget ceilings and revenue expectations. It also aims to follow up on key performance indicators and financial targets at the entity level. Among the other objectives of this initiative is the supervision of performance management processes, including the provision of incentives and accountability in the event that the results of these entities deviate from achieving the financial targets from the beginning of next year.

Developing budget preparation procedures: The Ministry of Finance launched a new methodology for preparing the budget in 2018 based on two principles: (1) distributing the budget from the total level to the detailed level, (2) raising the efficiency of spending. Where workshops were held with budget authorities to review the budget and determine its needs. This new methodology will be applied annually as part of the budget preparation stages in the future, so that the annual budget is in line with the Kingdom's financial targets. One of the most prominent features of the new methodology for preparing the budget is setting spending ceilings from the total level to the detailed level and taking into account priorities. Budget review workshops were also held, and the implementation of the governance system. The Ministry of Finance will also follow up on prioritizing and adhering to the spending ceilings of the entities. And working with the authorities to reduce some practices that negatively affect the efficiency of spending. 2 - Macroeconomic and financial planning: This pillar includes defining the necessary financial policies to achieve financial goals while supporting economic goals by directing government spending to sectors that support the strategic goals of the Kingdom, including Determining the financial revenues necessary to achieve this goal, and working on support and incentive initiatives such as: Citizen Account. Medium-term Public Finance Framework: This initiative aims to establish a clear framework for spending in the medium term (from 3 to 5 years), including setting spending ceilings. At the level of the budget and at the level of the authorities, and setting standards for the preparation and submission of the authorities for their draft budgets, and linking the ceilings of the authorities to strategic priorities, sector policies, and performance evaluations.

Detailed statement of the state budget

- The initiative to return fees paid by small and medium enterprises: This initiative is part of a broader package to stimulate the private sector, and includes a dual objective to encourage new small and medium enterprises to enter the market and support their growth during the first years of activity. This is achieved by returning fees paid by newly established companies (for example, fees related to new licenses, annual fees, and fees related to employers) during the first three years of their activity. Indirect Lending Initiative for Small and Medium Enterprises: Indirect government lending provides the capacity To take advantage of the network of non-bank commercial loan providers to distribute loans to targeted small and medium enterprises, by providing them with low-cost financing and refinancing. This would increase financing sources for small and medium-sized enterprises, which would improve their operations and investments. - Kafala Fund Raising Initiative: The Kafala program is now being restructured to ensure its sustainability and continued successful support for the small and medium-sized enterprises sector in the Kingdom. - Troubled Companies Support Initiative: Starting implementation A multi-stage program to identify troubled companies with a strategic dimension and support them financially in cooperation with the private sector (banks and funds) to implement the necessary (such as evaluation and financial support). Where the initiative provides a guarantee of the internal rate of return for private investment in these companies. Project Support Fund Initiative: It is a financing fund to provide low-interest loans to finance major health, tourism and real estate sectors projects with high economic impact to ensure the continuity and completion of projects.

High Efficiency Air Conditioning Initiative: Those who buy new air conditioners will receive a price subsidy if they choose one that is more energy efficient. The full implementation of the program, which includes the entire Kingdom, aims to purchase 520,000 air conditioners over the next four years, and the program will follow the requirements of the local content. Subsidized Housing Loans Initiative: Providing financial support to facilitate home ownership and assistance in obtaining real estate financing, and this will be done by providing financial support for the first installment. For the loan, it starts from 10% to 20%, depending on the level of income and the size of the family. - The initiative to launch the export incentive program: removing obstacles that stand in front of companies to start exporting, by providing grants for logistical, legal and marketing services, and providing companies with market information to help companies build their export capacity And discovering new markets. - The Export Financing Promotion Initiative: Improving export financing capabilities by expanding the scope of the program currently available and starting the process of establishing an import and export bank in order to provide exporting companies with the financing required to reach new markets. - The Government's Venture Investment Fund initiative in small and medium enterprises: establishing A fund focused on investing in enterprises during their early growth stages. Then, it targets the gaps in the current financing of small and medium enterprises. The Mega Investments Program Initiative: Accelerating the attraction of investments to the Kingdom through the Mega and Strategic Investments Program by negotiating specific contracts with major local and foreign investors to implement projects of high social and economic value for the Kingdom.

- The Broadband and Fiber Optic Stimulus Fund Initiative: It is a stimulus fund to accelerate the deployment of fiber and high-speed wireless Internet in urban and remote areas by providing financial incentives of up to 40% of the investment of Internet operators. The Building Technology Stimulus Fund Initiative: Building Technology And housing increases the productive capacity necessary to reach the housing goal by increasing the sector's productivity and positively affects the gross domestic product. Private Sector Workshops: Based on the views of the private sector during the workshops held in May 2017, the goal of the initiative is to institutionalize workshops and prepare them annually for direct communication between the government and private sectors. The implementation of this initiative increases clarity and informs the private sector of government plans to empower and support the private sector and the existing initiatives. Open Ministerial Conferences Initiative: Launching open conferences (panels) in chambers of commerce in the presence of ministers and senior officials, provided that they are supported by a working group headed by the Ministry of Commerce and Investment The membership of: The General Authority for Investment, the General Authority for Small and Medium Enterprises, and the Local Content and Private Sector Development Unit Saudi Arabia. The citizen account is direct cash transfers that will be allocated to the beneficiaries. In the future, this program will become one of the government platforms to provide support to citizens directly.

3 - Maximizing revenues for the government: This pillar is based on five main initiatives, whereby new revenue sources are developed in a way that ensures the provision of additional public benefits, such as encouraging competition and / or improving social behavior (reducing excess consumption, or consumption of harmful substances). The financial compensation for expatriates: This main initiative aims to encourage Saudization by bridging the cost gap between expatriates and Saudis. This is achieved by imposing a monthly fee on each expatriate employee based on the number of expatriates who are fewer and more compared to Saudi employees in the same establishment, starting from January 2018, with an annual increase of 200 riyals per month (300 riyals for each expatriate in an establishment with equal or lesser value). The number of expatriates for Saudis, 400 riyals, in case the number of expatriates exceeds Saudis in 2018). A financial fee was also imposed on the escorts starting in July 2017, with an annual increase of 100 riyals paid monthly (100 in the first year, then 200, 300, 400 riyals in subsequent years). Correction of energy prices: Correcting energy prices is the most important The main elements of the program for achieving financial balance, and this initiative aims to: 1- Stimulate rational consumption. 2- Encouraging the establishment of investments with a competitive advantage in the industrial sector. 3- Redirecting and rationalizing subsidies to the deserving groups. Changing the energy price correction plan from what was announced in the Fiscal Balance Program (2016 version) as shown below. (The plan is subject to change depending on the developments of the financial balance program).

(Graphic No. 7) (Graphic No. 8) - Correcting water prices: Correcting water prices constitutes a measure parallel to correcting energy prices, which aims at: 1- Strengthening the public finances situation. 2- Stimulating rational consumption. 3- Restoring Directing subsidies to reach the categories that are actually eligible and rationalizing them. - Value Added Tax: The application of value added tax is an implementation of the Gulf agreement and it is expected that value added will become one of the main sources of non-oil revenues in the Kingdom, which confirms the importance of the proper application of this tax, which will start on 1/1/ 2018 AD at the rate of 5% on the added value of products and services. - Selective tax: This type of tax achieves a double objective represented in: 1 - Developing non-oil revenues. 2- Encouraging rational consumer behavior by imposing a tax on some specific commodities such as soft drinks, energy drinks, tobacco and its derivatives. This list may later include other products such as luxury goods. 4- Raising the efficiency of government spending: This pillar aims to raise the efficiency of spending, from Through the following major initiatives: - Establishing the Spending Efficiency Achievement Center (Capital and Operational Expenditure Rationalization Office): as a government agency that supervises and supports other agencies in developing their initiatives to raise spending efficiency, remove obstacles to their implementation, and propose the necessary legislation and regulations to ensure the sustainability of spending efficiency. - Establish the Strategic Procurement Unit: as an authority It aims to transform government procurement into a strategic process that focuses on maximizing financial and development benefits in return for spending, and enhancing transparency through developing capacities, systems and procurement processes to measure and raise procurement efficiency by applying local and international best practices for each expenditure category.

These two pivotal initiatives aim to activate other initiatives and programs whose cumulative savings are estimated at approximately 220 billion riyals (+/- 15%) by the end of 2023. Government agencies, with the support of the Capital and Operational Spending Rationalization Office, were able to activate the first package of initiatives during 2017, and achieved savings amounting to 56 billion, whose cumulative effect extends until 2023 AD by avoiding additional operational costs amounting to approximately 57 billion riyals (for example, plans to raise the level of coordination In the health sectors to avoid expanding the construction of medical cities and hospitals, developing some supply chain practices to raise their efficiency in managing drug stocks, developing contracting standards for city cleanliness, raising the level of coordination in vision initiatives by merging and avoiding duplication). And with the establishment of the Spending Efficiency Center and the Strategic Procurement Unit during 2018, the Fiscal Balance Program looks forward to supporting government agencies by activating the second package of priority initiatives to achieve efficient spending. Program governance to achieve effective implementation: The Fiscal Balance Office was established in 2017, which aims to achieve goals The program by monitoring and following up the implementation of initiatives, evaluating their readiness and preparing new initiatives to achieve the program's objectives. Where a committee consisting of representatives from different entities supervises the implementation of the program and leads it to achieve its objectives. The Fiscal Balance Program Committee assumes the following main roles: Approving the executive plans of the Fiscal Balance Program. Achieving consensus among the various main stakeholders in the Fiscal Balance Program Committee. Providing strategic inputs to the data of the financial balance program, scenarios, paths and initiatives related to it.

The committee will be affiliated to two bodies in the royal court responsible for decision-making: the Finance Committee (responsible for setting financial goals) and the Strategic Committee (responsible for setting national economic priorities and monitoring the implementation of Vision 2030 programs). Sixth: Public finance forecasts in the medium term: According to the financial and economic framework on the basis of which the budget was prepared and the initiatives of the aforementioned financial balance program, it is estimated that the budget deficit in 2018 will reach about 195 billion riyals, equivalent to 3. 7% of the GDP, down by 6%. 1 percentage point of GDP for the expected deficit for 2017, a significant decrease from the budget deficit achieved in 2016, which amounted to about 8. 12% of the gross domestic product (311 billion riyals). The decline in the estimated deficit ratios for the year 2018 is due to the increase in total revenues by about 6. 12% compared to the expectations of the current year 2017 AD, with the implementation of reform measures to develop non-oil revenues and diversify their sources, despite the increase in expenditures by about 6. 5%, including an increase in non-financial assets (capital spending) by about 6. 13% compared to expectations for the current year 2017.

Public Finance Estimates for the Medium Term (2017-2020) (Billion Riyals unless otherwise stated) Actual Budget Estimates 2016 2017 2017 2018 2019 2020 Revenues Total Revenues 519 692 696 783 843 909 Taxes 82 121 97 142 164 18 9 taxes on income 15 18 14 15 16 18 Profits and capital gains Taxes on goods and services 30 56 47 85 103 124 Trade taxes 20 31 21 25 26 28 Other taxes 17 16 15 17 18 20 Other revenues 437 571 599 641 679 720 Total expenditures Expenses 830 890 926 978 600. 1 050 . 1 Expenses (operating expenses) 696 716 746 773 789 822 Compensation of employees 409 412 440 438 445 452 Goods and services 150 153 135 143 145 146 Financing expenses 5 9 9 14 19 24 Subsidies 7 7 7 14 7 7 No Grants 5 3 3 3 3 3 Social benefits 41 37 44 65 74 94 Other expenses 79 95 108 95 95 96 Non-financial assets 134 174 180 205 218 228 (capital expenditures) Budget deficit / surplus Budget deficit / surplus 311 - 198 - 230 - 195 - 163 - 141 - Budget deficit / surplus as a percentage of 8. 12% 7. 7% 9. 8% 3. 7% 9. 5% 9 . Debt and assets 4% of GDP 317 - - 438 555 673 749 Debt as a percentage 13% - 17% 21% 24% 26% of GDP Government deposits 683 - - 583 456 411 345 With the Saudi Arabian Monetary Agency Government deposits as a percentage 2. 28% - - 7. 22% 2. 17% 8. 14% 0. 12% of the gross domestic product

A - Revenues A number of measures have been implemented since 2016 that will have an impact on revenue growth in the medium term, in addition to a plan to implement a number of other measures in the coming years that will gradually diversify sources of revenue, including the imposition of value-added tax and the application of the corresponding The financial burden on expatriates, as well as correcting energy prices until reaching the level of energy reference prices, as the government aims to develop revenues structurally and continuously as a main source of financing public expenditures and reducing the budget deficit. Estimates indicate that total revenues reached about 783 billion riyals in 2018, an increase of 6. 12% from what is expected in 2017 AD, and it is expected to reach 909 billion riyals in 2020 AD, with an average annual growth rate of 3. 9%. As it is expected that the proceeds from taxes will be recorded at 142 billion riyals in 2018 AD, at a growth rate of 46% compared to 2017 AD, until it reaches 189 billion riyals in 2020 AD. It is expected that the tax item on income, profits, and capital gains in 2018 AD will achieve about 15 billion riyals, at a growth rate. amount of 4. 10% compared to 2017 AD, until it reaches 18 billion riyals in 2020 AD, taking into account the expected growth rates of economic activity for the coming period. While the revenue of the item of taxes on goods and services is estimated at 85 billion riyals, an increase of 82% from 2017 AD, to reach 124 billion riyals in 2020 AD, as a result of the implementation of some economic reforms such as the value-added tax, which is estimated to generate a financial return for the state treasury in the amount of 23%. One billion riyals in 2018 AD, and it is estimated that the revenues from the tax on excise goods in 2018 AD amounted to 9 billion riyals, and it is expected that the revenue item from the financial compensation for expatriates in 2018 AD will achieve an amount of 28 billion riyals. It is also estimated that the item of taxes on trade and transactions will achieve International International amounted to 25 billion riyals in 2018, with a growth rate of 17% compared to 2017, until it reaches 28 billion riyals by 2020. The growth in this item is due to the implementation of some reforms related to customs revenues, such as the return of customs duties for 193 commodities and the application of post-audit after glades.

With regard to the item of other taxes that includes zakat, it is estimated that it will achieve 17 billion riyals in 2018, an increase of 8. 10% from 2017 AD to reach 20 billion riyals by 2020 AD. With regard to the item of other revenues, which includes oil revenues, it is estimated that it will achieve an amount of 641 billion riyals in 2018 AD, with a growth rate of 7% compared to 2017 AD, until it reaches 720 billion riyals. In 2020 AD, as it is estimated that oil revenues in 2018 AD, including the financial impact of correcting energy prices, will reach 492 billion riyals, compared to 440 billion riyals for the year 2017 AD, an increase of 8%. 11%. It should be noted that the energy price correction implementation plan has been revised to bring about a slower progression in implementation, taking into account the importance of driving economic activity at higher rates. The strategic objectives of the Vision 2030 programs, and defining spending levels through a policy that achieves a balance between the goal of reducing the budget deficit with levels of public debt not exceeding 30% of nominal GDP on the one hand, and the goal of supporting economic activity by directing government spending in a way that supports the economic vision and strategic plans targeted on the other. On the other hand. Government spending, which is one of the main drivers of the economy, represents about 36% of the nominal GDP in 2017. For this reason, a budget was approved with an estimated total expenditure of 978 billion riyals, up from the previous year by 6 percent. 5%. This increase is driven by the expansion of spending on allocations for Vision 2030 programs initiatives.

- Operational expenditures: In the medium term, the fiscal policy aims to focus on spending priorities with a social and economic return with regard to operating expenditures, such as private sector stimulus packages, the citizen account program, and programs to achieve Vision 2030. Operating expenditures for the year 2018 were estimated at about 773 billion riyals, i.e. About 79% of total expenditures, an increase of about 6. 3% over operating expenses in the current year as a result of implementing several initiatives to raise spending efficiency. The workers' compensation chapter constituted about 8. 44% of the total expenditures, which were estimated at about 438 billion riyals, which are approximately the same actual levels for the current year. While the proportion of each section of goods, services and social benefits to total expenditures amounted to about 6. 14% and 7. 6%, respectively, as spending on the use of goods and services increases by 6%, and spending on subsidies increases by 102%, reaching approximately 14 billion riyals, to implement some programs such as incentive packages directed at the private sector that aim to strengthen and increase this sector, as well as a support program industry, and spending on social benefits increases by 1. 48% as a result of approving citizen account allocations, which may reach 4. 32 billion riyals in 2018. Estimates of the financing expenditure section increased by 1. 57% compared to 2017, driven by the increase in the volume of issuances of securities expected to finance the budget. As shown in the previous table: The average growth in operating expenses during the period from 2018 to 2020 is about 3. 3%, driven by the increase in spending on social benefits resulting from the continuous increase in spending on the citizen account program, and the growth in spending on financing costs resulting from the growing volume of issuances with low growth rates for the rest of operating expenses.

-Capital expenditures: Fiscal policy during the medium term aims mainly at developing capital spending, developing infrastructure and the Kingdom's Vision 2030 programs to advance the pace of economic activities, as estimates of capital expenditures during the fiscal year 2018 amounted to about 205 billion riyals, which constitutes 21 percent. Of the total expenditures, an increase of 6 . 13 percent for the year 2017 AD to finance projects of vision programs and infrastructure development to stimulate economic growth and generate more job opportunities for citizens. The ratio of capital expenditure to total government spending will increase from 19 percent in 2017 AD to 22 percent in 2020 AD. While the average growth of public spending during the period from 2018 to 2020 is about 3. 4, the average growth of capital expenditure over the medium term will grow at a higher rate of 3. 8 percent to boost economic activity and increase available job opportunities. C - Public debt and financing: The Ministry of Finance, through the Public Debt Management Office and with the approval of the Finance Committee at the Royal Court, developed a medium-term strategy and an annual plan for managing public debt that takes into account the best available opportunities in the process of borrowing and issuing financing instruments. in the local and global markets. This strategy also takes into account, when issuing local financing tools, not to negatively affect liquidity in the local financial sector, economic growth rates, and the objectives of Vision 2030 in promoting private sector growth. In addition to studying the various options in the global markets, and analyzing the target markets, currencies, and future interest rates, in order to ensure the formation of a financing portfolio at the best possible costs. The public debt strategy will also depend on loans and the diversification of issuances between sukuk and bonds with different maturities between short, medium and long terms.

The Kingdom's Vision 2030 includes many initiatives, programs and sectoral development plans that would bring about an important shift in economic performance, during which non-oil GDP growth rates are expected to gradually increase in the medium term. According to the government's plan to add more gradualness to the fiscal balance program, it is estimated that the budget deficit will decrease gradually and continuously in the medium term until fiscal balance is achieved by 2023. These reforms contribute to the development of total revenues, with an average annual growth rate estimated at 6. 8%. This is also offset by an increase in expenditures in the medium term, with an average annual growth of 4. 3% while continuing with plans to raise spending efficiency. (Graph No. 9) (Graph 10) Seventh: Budget for the fiscal year 2018 AD at the sectoral level: The total expenditures for the year 2018 AD are estimated to reach 978 billion riyals, an increase of 6%. 5% of the expenditure expectations in 2017, due to the increase in operating and capital expenditures as a result of spending on the initiatives of programs to achieve the Kingdom’s Vision 2030. Among these initiatives is the start of the implementation of the citizen's account program, which came to face the effects that may arise when applying some financial measures, including the correction of energy prices. The program is scheduled to start before the implementation of any corrections in energy prices. Below are the details of the budget allocations by sectors. Note that spending on the initiatives of programs to achieve the Kingdom's Vision 2030 falls within the expenditures of the sectors. However, this spending may change by increase or decrease, given that some programs to achieve the vision are still in the development stage.

1 - Public administration sector: What has been allocated to the public administration sector in the 2018 budget amounted to about 26 billion riyals, including the budget for projects, and the budget for new programs for initiatives, to implement the initiatives of Vision 2030 realization programs for the ministries (Justice, Hajj and Umrah, and Civil Service). Which aims to develop the performance of those ministries and achieve efficiency and effectiveness in the use of available resources to raise the quality of outputs. , for roads, ports, railways, airports, housing, communications, information technology, postal services, the industrial cities of Jubail and Yanbu, Ras Al-Khair City for Mining Industries, and Jazan City for Basic and Transformational Industries. . 2 kilometers, or 45% of the total plan for the five-year period (2016-2020 AD), which is estimated at about 5,000 kilometers. Disbursement of this amount will continue on approved projects from previous fiscal years in this sector. 3 - Economic Resources Sector: amounted to what has been allocated For the economic resources sector and general programs, about 105 billion riyals, including 42 billion riyals for programs and projects of programs to achieve the Kingdom’s Vision 2030.

It also included providing drinking water, strengthening water sources, providing sanitation services, constructing dams, digging wells, detecting and treating water leaks, replacing water and sewage networks, rationalizing water and electricity consumption, supporting renewable energy, raising the efficiency and performance of water desalination plants, and infrastructure for cities. The industrial, new silos and mills and the expansion of the existing ones. The total lengths of the drinking water networks implemented during the period 2016-2018 will be about 988 m. 15 km, or 62% of the total planned for the five-year period (2016-2020), estimated at about 591. 25 km, and the total length of sewage networks implemented during the period 2016-2018 will be about 842 km. 6 km, or 35% of the total planned for the five-year period (2016-2020), estimated at about 788. 19 km, and the implementation of 19 dams will be completed during the period (2016-2018 AD), i.e. 51% of the total plan for the five-year period (2016-2020 AD), which is estimated at about 37 dams, and 243 wells will be completed during the period (2016-2018 AD), i.e. 51% of the project. The total plan for the five-year period (2016-2020 AD), estimated at about 472 wells, and the construction of 51 sewage treatment plants will be completed during the period 2016-2018 AD, or 50% of the total plan for the five-year period (2016 AD-2020 AD), which is estimated at about 101 sewage treatment plants, 45 A purification plant during the period 2016-2018, i.e. 63% of the total plan for the five-year period (2016-2020), which is estimated at about 72 purification plants. Disbursement of this amount will continue on approved projects from previous fiscal years in this sector. 4 - Municipal Services Sector: What has been allocated to the municipal services sector, which includes the Ministry of Municipal and Rural Affairs, secretariats, municipalities, and regions and cities development agencies, amounted to about 53 billion riyals, including 5 billion riyals for initiatives of vision realization programs. The budget also includes existing development projects, including public transport projects, the implementation of intersections, tunnels and bridges for some roads and streets within cities, and an improvement and development of what exists in order to relieve traffic jams, in addition to completing the implementation of asphalt projects, street lighting, rainwater drainage, preventing the dangers of torrents, providing equipment and machinery, and projects to get rid of Waste, backfilling of swamps, development and improvement of sea beaches, administrative buildings, gardens and parks.

5 - The education sector: What has been allocated to the general education sector, higher education and manpower training amounted to approximately 192 billion riyals, including a budget for a number of initiatives for programs and projects to achieve Vision 2030 at an amount of 5 billion riyals. The budget included new projects and additions to existing projects for educational complexes And schools for all educational levels for boys and girls in various regions of the Kingdom, laboratories, laboratories, infrastructure for universities, training institutes and colleges, and rehabilitating the current facilities of schools, universities, training institutes and colleges, as the total costs added to new and existing projects amounted to about 4 billion riyals, most of which are for initiatives, and spending will continue on projects that are currently being implemented In all regions of the Kingdom, according to the stages of implementation, as follows: 1 - The implementation of the King Abdullah bin Abdulaziz project for the development of general education, "Tatweer", at a cost of 9 billion riyals, will continue through the "Education Development Holding Company". 3 billion riyals. 2 - During the fiscal year, buildings were received for 352 new schools in various regions, and 431 schools will be received in the fiscal year 2018, bringing the number of schools expected to be received for the period 2016-2018 AD to about 1,107 schools, or 42% of the total plan for the five-year period (2016 - 2020 AD) is estimated at about 2,621 schools, and buildings for 1,717 complexes and schools are currently being implemented. 1 billion riyals, or 31% of the total plan for the five-year period (2016-2020 AD), which is estimated at about 5 billion riyals.

The program of the Custodian of the Two Holy Mosques for external scholarships will continue its course, as the number of students studying abroad who are supervised by the Ministry of Education has reached more than 173,000 male and female students with their companions, with annual expenses of 7. 14 billion riyals, excluding employees on scholarships from government agencies. 6- The security and administrative areas sector: What has been allocated to the security and administrative areas sector is about 101 billion riyals, and the sector’s budget includes new projects and additions to existing projects with a total cost of 6. 12 billion riyals to provide security requirements of installations, equipment, weapons and ammunition. Spending will also continue on existing projects that are currently being implemented, most notably the project of the Custodian of the Two Holy Mosques to develop security headquarters, which was approved in five phases and includes the establishment of 1,296 security headquarters during the period 2016-2020 AD, as the recipient during the period 2016-2018 AD will be approximately 551 security headquarters, i.e. 43 % of the total plan for the five-year period, and projects to construct 14 residential complexes in five regions that include 10,000 housing units, of which the recipient during the period 2016-2018 AD will be two residential complexes, i.e. 14% of the total plan for the five-year period (2016-2020 AD) and contains 600 housing units That is, 6% of the total plan for the five-year period (2016-2020 AD), and two medical cities with a clinical capacity of (2,500) beds are currently being implemented, none of which will be completed by the end of fiscal year 2018 AD. 7 - Military sector: What has been allocated to the military sector has reached 210 billion Real, the budget included about 2. 10 billion riyals for new development programs and projects that include building advanced systems and capabilities, and an amount of 5. 3 billion riyals for the military educational sector, which includes military colleges and King Saud bin Abdulaziz University for Health. In addition, 5. 26 billion riyals for military medical services, in addition to allocating funds for development initiatives that include developing armament and defense systems, improving military readiness, developing capacity building, improving capabilities, increasing effectiveness, raising performance efficiency, modernizing strategic planning mechanisms, developing military bases, supporting the localization of military manufacturing, and developing housing and facilities. Services . In addition to allocating the necessary amounts for the salaries and wages of workers in the military sectors, while continuing to spend on operational and support programs and military and service construction projects to provide the needs of these sectors.

8 - Health and Social Development Sector: About 147 billion riyals were allocated to health services and social development sectors, including about 33 billion riyals for vision realization initiatives. The budget also included the completion of establishing and equipping hospitals and primary health care centers in all regions of the Kingdom, and 36 new hospitals are being implemented and developed in the regions of the Kingdom with a bed capacity of 8,950 beds, in addition to two medical cities with a total bed capacity of 2,350 beds. During the current fiscal year, one hospital received a clinical capacity of 100 beds. The number of hospitals received during the period 2016-2018 AD will be about 25 hospitals, or 58% of the total plan for the five-year period (2016-2020 AD), and a clinical capacity of about 5,150 beds, or 52% of the total plan for the five-year period (2016-2020 AD). As for the two medical cities that are currently being implemented and developed, they will not be completed before the end of the fiscal year 2018. In the field of social services, the budget included the development of 9 sports cities within the initiatives of the General Authority for Sports and the preparation of three sports stadiums in each of Riyadh, Jeddah and Dammam to be ready for families to enter during the next fiscal year, according to For the controls related to this, and the development of support facilities to be open to the community 24 hours, and support the capabilities of the Ministry of Labor and Social Development to achieve the goals of social development and support programs to address poverty, as the allocation for the next fiscal year amounted to about 30 billion riyals.

9 - General Items: What has been allocated to general items amounted to 89 billion riyals, and it included the government’s share for the Public Authority for Retirement and Social Security, subsidies, debt cost, and emergency expenditures. The following table shows the sectoral distribution of the 2018 budget: Expenditure estimates at the sectoral level (billion Riyals, unless otherwise indicated (expectations of the budget change 2017 2018, % of sector expenditures 926 978 6. 5% General Administration 30 26 3 . 12 - Military personnel 224 210 3. 6 - % security and administrative areas 109 101 3. 7 - % of municipal services 49 53 0. 9% Education 228 192 8 . 15 - % health and social development 133 147 5. 10% Economic resources and public programs 39 105 2. 169% Basic equipment and transportation 29 54 2. 86% of the total sectors 841 889 7. 5% General items 85 89 7. 4%

Eighth: Economic and Financial Risks: The 2018 budget and the financial and economic framework in the medium term were prepared in the light of major financial and economic assumptions built on the basis of information, developments, and internal and external economic conditions available at the time of preparing the budget estimates. However, a number of these financial and economic variables may witness developments that could positively or negatively affect the assumptions and, accordingly, the results of the current estimates of the financial performance during the next fiscal year and in the medium term. The most important variables that have a potential impact on the performance of the local economy are represented in the following: 1 - International oil prices: Despite the reforms and initiatives aimed at diversifying the economy and developing sources of revenue in the Kingdom, the expected impact will be gradual and thus continued dependence on oil revenues as a main source. for budget revenues. In view of the sharp fluctuations in oil prices, up and down during the past years, the decline in oil prices represents one of the most important risks that negatively affect financial performance. The most important factors affecting prices on the global demand side are the growth of the main developed and emerging economies, and on the supply side the extent of compliance with the OPEC agreement and the development of other sources of energy in addition to the political developments in some oil-exporting countries. 2- Non-oil GDP growth rates: Non-oil economic activity growth rates are considered a major factor in the development of public revenue performance and thus affecting the performance of public finances, especially in light of the implementation of initiatives New ones for the development of non-oil revenues, such as value-added tax and selective fees on some commodities and others, the proceeds of which are linked to economic activity.

The most important risks are the extent of the private sector's response to the investment opportunities available in the Kingdom and the improvement in the investment environment, and the changes that may occur in the pattern of private consumption in the light of economic developments. In order to confront these risks in the field of encouraging and stimulating private sector investments, the government, In addition to maintaining a level that stimulates government investments, by implementing a number of initiatives, including preparing programs to stimulate investments, especially in the field of industry, paying dues to the private sector without delay, as well as applying measures to encourage and attract investment in the Kingdom, in addition to privatization programs that provide opportunities for the development of private sector investments, And continuing to implement investments to develop the infrastructure, which is also attractive to the development of private investments, in addition to preparing a new system for the distribution between the public and private sectors, and at the level of stimulating private consumption, the government initiated a number of compensatory measures such as applying the citizen account as compensation for families to avoid negative effects on their levels of income. 3. Spending - The financial and economic effects of economic initiatives and reforms: The government is implementing several initiatives aimed at correcting some financial and price imbalances and achieving financial sustainability and economic growth in the medium term, which is necessary to maintain adequate living standards for citizens, given that financial sustainability is a major factor for the private sector when making his investment decisions. These initiatives may have side effects or differ from their initial estimates, especially in light of the fact that some of them are being implemented for the first time without a precedent that allows knowing their financial and economic impacts with certainty.

The government believes that the measures taken are not an end in themselves, but rather tools to achieve the goals of financial sustainability and at the same time push economic activity. Therefore, it is following up on the implementation of reforms and monitoring their economic effects, with a readiness to change some decisions to bring about a correction in the course whenever that is required, which was taken into account when implementing some previous measures such as the decision to return government allowances, or adding more gradation in some other measures such as correcting energy prices. . The Kingdom’s economy enjoys a strong financial position and an appropriate amount of reserves that allow it to withstand external shocks and achieve more gradual implementation of reforms. And qualifying cadres capable of implementing and achieving the goals that were planned for this year, but the absorptive capacity of government agencies remains one of the existing challenges that require more care, attention and follow-up. and developments in global markets, especially the prices of major commodities. Despite the improvement in the performance of the global economy and the significant reduction in risk levels compared to the past decade, there remain a number of potential risks that could affect the performance of the global economy during the period, including fears of the trend to further restrict trade policies, as indicated by the US administration, and the trend The potential for raising US interest rates, the possibility of a slowdown in the growth rates of some emerging economies, inflation of asset prices in some global markets, the negative effects of Britain's exit from the European Union, and some other regional unrest, which are factors that could affect all or some of them on the pace of recovery in rates. growth of the global economy.

In order to face these risks, the government aims to reduce the budget deficit and stabilize public debt levels in a way that increases the resilience of the economy to withstand external shocks, in addition to improving the performance of the current account in the balance of payments by increasing the competitiveness of the economy, increasing non-oil exports, increasing tourism rates, and other measures. Measures that contribute to the growth of the local economy and maintaining high levels of foreign reserves for the Kingdom. Positive factors on the economy In addition to the aforementioned risks that carry with it the potential for negative or positive effects on financial performance estimates during the coming year and in the medium term, there are a number of factors that can To have a positive impact on the performance of the Kingdom's economy, such as: the effect of raising women in the labor market, the impact of lifestyle improvement initiatives on economic growth and the level of citizen's well-being, and the effect of privatizing part of the capital of Saudi Aramco and some other assets in increasing the expansion of private sector investment opportunities in The economy, and thus the increase in the percentage of new job opportunities available to Saudis in light of the specific initiatives designed to raise the percentage of Saudization, as well as the impact of anti-corruption campaigns in creating an attractive and encouraging investment environment for foreign investors, and the existence of an improvement in the performance of the global economy more than expected, and the impact of starting the implementation of some major projects Such as the city of NEOM on economic performance, and other projects and initiatives that can achieve a higher percentage of non-oil economic growth rates compared to current estimates. It should be noted that the economic forecasts contained in this document did not take into account all the initiatives of the vision realization programs that are currently being developed. . It also did not take into account the initiatives of the National Development Funds and the Public Investment Fund beyond 2018, which are expected to have a greater positive impact on economic growth and the creation of more job opportunities.