Saudi Arabia's Non-Oil Income Rises 63 Percent on New Taxes

(Bloomberg) -- Saudi Arabia’s non-oil revenue climbed 63 percent in the first quarter of 2018, propelled by improved tax collection as part of a drive to reduce the economy’s reliance on income from oil exports.

Revenue rose to 52.3 billion riyals ($14 billion), partly due to the introduction of value-added taxation and measures taken over the past two years, including a levy on expatriates working in the world’s biggest oil exporter, the Finance Ministry said on Monday. The collection of zakat, an Islamic tax, also “significantly improved,” it said.

Crown Prince Mohammed bin Salman is spearheading a plan that seeks to prepare the Saudi economy for the post-oil era and shore up public finances. In addition to the VAT, the government has raised fuel and utility prices and briefly curtailed public-sector allowances. The reforms, however, have hurt economic growth, prompting authorities to boost planned spending for this year and push the timeline for balancing the budget to 2023 from 2019.

Oil revenue reached 114 billion riyals, a 2 percent increase compared with the same period a year earlier. Spending rose 18 percent in the first quarter from a year ago, to 200.6 billion riyals, in line with efforts to stimulate the economy, the ministry said.

Finance Minister Mohammed Al-Jadaan said first-quarter figures suggested measures to curb spending and diversify income sources were working.

The data show “rapid and significant progress in economic reform to help achieve the medium-term fiscal balance program goals for 2023,” he said.

The first-quarter budget deficit was 34.3 billions riyals, about 18 percent of estimated annual shortfall, the ministry said.

©2018 Bloomberg L.P.