Military spending is devouring the Saudi budget ... and expectations of new taxes on citizens
Increased military spending is devouring Saudi Arabia's military budget amid the partial withdrawal of the United Arab Emirates from Yemen, the rise of Ansar Allah (Houthi) attacks and military tension with Iran.
Saudi Arabia's military spending is expected to rise sharply this year compared to the official forecast of the Saudi government in the 2019 budget, which will expire in December, the S & P Global forecast in a report on the Saudi economy predicted.
According to the US bulletin, Saudi Arabia expected the military budget to fall by 12% to SR191bn (equivalent to SAR0.27) this year, but these expectations may not be realistic given the pressures currently under way in the Kingdom.
According to the Stockholm Institute for Peace, in its report on global defense budgets for 2018, Saudi Arabia ranks third in terms of military spending after the United States and China, where the Institute estimated its military spending by about 67.6 billion dollars in 2018.
But S & P Global says actual spending has gone up more. The report estimates Saudi military spending on average to be about 25% of the Kingdom's gross domestic product. Trading Economics estimates the size of the Saudi economy at $ 786 billion this year.
Analysts noted that the withdrawal of the United Arab Emirates from Yemen and the cost of covering the US landing to protect Saudi Arabia in addition to the repercussions of military tension with Iran and its implications for the increasing attacks by the group "Ansar Allah" (Houthis) on Saudi facilities will increase the Saudi military spending this year more than military spending Last year of 228 billion Saudi riyals.
The high rate is expected to push the Saudi government into borrowing more from abroad this year, pressure domestic spending and force the government to impose new taxes on citizens.
It is noteworthy that this high rate of military spending comes at a time when the price of oil is much lower than the price set by Saudi Arabia to cover spending Balmsanp estimated at $ 75 a barrel.
According to S & P Global, the kingdom needs an average oil price of about $ 85 a barrel this year to cover spending this year's budget of 1.106 trillion rials (about $ 294.91 billion).
But the International Finance Institute in Washington says Saudi Arabia's budget needs a higher oil price and is estimated at an average of $ 89.5 per barrel. The price of Brent crude oil is around $ 64 per barrel. Which means that the Saudi budget deficit will rise at a rate much higher than Saudi official forecasts.
Saudi Arabia said on Tuesday it posted a deficit of 33.5 billion riyals ($ 8.93 billion) in the second quarter of this year.
It also reported that its oil revenues fell by 5.0%. According to data published by the Saudi Finance Ministry on Tuesday, Saudi Arabia generated oil revenues of 174.9 billion riyals in the second quarter, while its non-oil revenues amounted to 85.8 billion riyals, down 4 percent year on year.