Finance Minister Mohammed Al Jadaan outlined the government’s fiscal strategy for 2025 after his ministry released its budget statement for the upcoming fiscal year. Here’s what you need to know:

No new taxes anytime soon: There are no plans for major changes to tax policies next year or in the foreseeable future, Finance Minister Mohammed Al Jadaan told Al Arabiya (watch, runtime: 2:13). The government is focused on supporting growth rather than burdening the economy with higher taxes, as economic growth will lead to greater public revenue via taxes and other means, he explained. However, the Saudi government does intend to take measures to improve compliance with existing tax policies, Al Jadaan added.

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So, how will the government bridge the budget deficit? Saudi Arabia will tap local and global debt markets in 2025 to finance the budget gap, Al Jadaan confirmed in a separate interview with Asharq Business (watch, runtime: 19:04). This will involve new bond and sukuk issuances for domestic and external markets in both local and foreign denominations, as well as alternative financing, Al Jadaan said.

The strategy will benefit from the interest rate reversal and a decreased cost of borrowing, with falling interest rates also yielding upshots for consumers, private sector investments, and homeownership. The government does not intend to employ central bank reserve assets to bridge the budget deficit as these resources are set aside for unexpected shocks and not for financing planned spending, the minister added.

Deficits aren’t all that bad: Deficits of SAR 100-140 bn can be beneficial, Al Jadaan said, as long as the returns on public spending exceed the cost of borrowing. This rationale anchors the government’s attitude towards fiscal expansion in 2025, 2026, and 2027, the minister explained. At the same time the government is mindful that fiscal expansion is only sustainable if debt is accessible at reasonable cost. Moreover, deficits should not overload the domestic economy and cause inflation. “This balance is very important,” Al Jadaan said.

Speaking of public spending: All government projects and strategies have secured funding all the way to 2030, the Saudi Gazette quotes Al Jadaan as telling reporters. The minister delineated between public finances and the Public Investment Fund (PIF), which has a separate governance framework and is distinct from the Finance Ministry. The fund “establishes companies dedicated to specific projects, allocates budgets to them, and assigns independent boards of directors responsible for their management and execution,” Al Jadaan explained.

Straightening out PIF’s priorities: Al Jadaan also echoed recent statements that Neom is a “multi-decade project” while less ambitious schemes such as Diriyah are “already operational.”

At the end of the day, the diversification agenda is making a difference: Some non-oil sectors are seeing “more growth than planned” with the government planning to “double down” on those successes, Economy and Planning Minister Faisal Al Ibrahim told Bloomberg in another interview yesterday (watch, runtime: 3:34). Saudi Arabia crossed the 50% mark for the contribution of non-oil sectors to the GDP in 2023, with this figure now at 52%, Al Ibrahim said. This represents a “structural shift” in the Saudi economy, bringing the country closer to its target of weaning itself from over dependence on oil.

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