How Mohammed bin Salman Burdened Saudi Arabia of Heavy Loans and Debts
Mohammed bin Salman, the crown prince of Saudi Arabia, persists in his unsuccessful foreign investments, squandering tens of billions of dollars thus far. These endeavors are aimed at alleviating the burden of Saudi Arabia's hefty debts and loans.
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According to Mohammed bin Salman's plan, Saudi Arabia intends to borrow $22.9 billion in 2024 to address the country's financial requirements of 86 billion riyals for the year.
Official data from the Saudi government indicates that Saudi debts are projected to reach 1.115 trillion riyals by the end of 2024.
Saudi Arabia finalized its 2024 budget in early December, anticipating a budget deficit of 79 billion riyals ($21.07 billion).
Meanwhile, the Saudi Ministry of Finance reports that the Saudi budget deficit is anticipated to reach 82 billion Saudi Riyals (approximately $21.8 billion) in 2023. The ministry also forecasts the country's GDP to grow by 4.4 percent in 2024, following a marginal increase of 0.03 percent this year.
Observers highlight that Saudi Arabia's persistent budget deficit in 2023 underscores the failure to realize Mohammed bin Salman's Vision 2030, exposing his falsehoods and exaggerations regarding this vision.
Since the inception of Vision 2030, Mohammed bin Salman has made numerous deceptive pledges across various sectors, notably the economy, promising economic diversification, growth, development, debt reduction, and job creation.
However, after seven years of "Riyazat," the figures paint a starkly different picture from Muhammad bin Salman's assertions. The annual report from the Saudi Ministry of Finance reveals a deficit of 82 billion riyals, with revenues amounting to 1.193 billion riyals and expenses totaling 1.275 billion riyals for the country.
Furthermore, public debt has soared to 1.024 billion riyals, marking a new record. Previous forecasts had indicated a budget surplus, but the outcome has been a deficit instead.
The public debt has surged to 1.024 trillion riyals, marking a new record, despite previous forecasts pointing towards a budget surplus. Instead, the Saudi government grappled with a budget deficit in 2023, a trend expected to persist into 2024.
All government projections had indicated a budget surplus ranging between 9 billion riyals and 16 billion riyals for 2023. However, not only did this surplus fail to materialize, but the Saudi government encountered a deficit instead.
Indeed, the budget deficit has emerged as a consistent feature of the Saudi economy since Mohammed bin Salman assumed the role of crown prince in Saudi Arabia and unveiled Vision 2030.
Except for 2022, when a spike in oil prices occurred due to the conflict between Russia and Ukraine, Saudi Arabia has experienced a budget deficit for six consecutive years, spanning from 2016 to 2021.
A brief retrospective reveals that Saudi Arabia encountered a budget deficit only four times over a fifteen-year period, from 2000 to 2014, occurring solely in 2001, 2002, 2009, and 2014.
During the nine-year reign of King Salman and his son, Saudi Arabia has grappled with a budget deficit for eight of those years, marking a perilous milestone in the nation's history.
With the unveiling of Mohammed bin Salman's Vision 2030, assurances were made that the Saudi economy would wean itself off reliance on oil revenues and diversify its income sources. However, the Ministry of Finance of Saudi Arabia presented misleading statistics and figures regarding the country's non-oil income, without clarifying the origins of these revenues.
Subsequent revelations exposed that these revenues were primarily sourced from taxes, which surged thirteenfold during Bin Salman's eight-year tenure. In 2015, tax revenues constituted a mere 2.7% of total revenues for the Saudi government, but by the first half of 2023, they had ballooned to 35.4% of government revenues.
In 2023, Saudi Arabia experienced a remarkable surge in taxes, reaching levels as high as 82% in certain cases, contrasting sharply with the modest 18% increase in non-oil revenues.
For instance, tax collections over the first nine months of the year amounted to 277.9 billion riyals, representing nearly a third of total revenues. By comparison, this figure stood at 226.8 billion riyals during the same period in 2022.
It's important to note that while tax hikes may boost government revenue, they do not necessarily equate to genuine economic growth. Rather, they impose a new financial burden on the shoulders of citizens.
On the other hand, the Saudi government's inability to deliver on its pledges of diversifying income streams and enticing foreign companies for investment prompted Saudi Arabia to introduce new tax exemptions lasting 30 years aimed at enticing international companies.
The continued reliance on oil, taxes, and increased borrowing to fund the escalating expenses of Vision 2030 initiatives compelled Saudi Arabia to postpone certain projects for the first time, aiming to alleviate pressure on the economy. This decision was particularly significant following the announcement of a 4.5% decline in Saudi Arabia's annual growth by the Saudi Finance Minister.
Since the inception of Vision 2030, Saudi Arabia has witnessed a surge in debts to unprecedented levels. Starting at 142.2 billion riyals at the end of 2015, which accounted for only 5.8% of the GDP, these debts surpassed one trillion riyals for the first time in 2023, reaching 1.024 trillion riyals, equivalent to 24% of the GDP.
As numerous projects in Saudi Arabia remain stalled or abandoned, the nation's economy continues to grapple with significant challenges. These challenges underscore issues such as excessive government spending, opaque expenditure practices, and substantial investments in sports and non-profitable recreational activities.
Regrettably, it is the Saudi citizen who bears the brunt of these policies. From escalating tax rates to rising inflation, a dearth of job opportunities, and inadequate wages that fail to cover living expenses, the Saudi populace is left as the sole victim of these detrimental economic strategies.
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