Saudi Arabia's budget deals flexibly with oil and interest fluctuations... and savings exceed 800 billion riyals

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Talaat Hafez, a banking expert, said that Saudi Arabia’s financial statement for next year is characterized by a high degree of consistency with the current conditions at the regional and global levels, in light of high interest rates, oil price fluctuations, geopolitical developments, supply chain disruptions, and challenges associated with trade protection.

Hafez added, in an interview with Al Arabiya Business, that the fiscal and monetary policy showed consistency and flexibility in dealing with these developments, which strengthened the ability of the state’s general budget to deal with them proactively, pointing to the continuation of capital spending at levels exceeding 1.3 trillion riyals, along with revenues exceeding 1.2 trillion riyals.

Saudi Arabia continues the expansionary approach in the 2027 budget despite the challenges

Hafez pointed out that the budget includes a deficit of about 190 billion riyals, but it does not represent a source of concern in light of the continued development trend, considering that the budget reflects a strong financial ability to deal with changes wisely and flexibly.

With regard to saving, he explained that one of the goals of the Financial Sector Development Program is to develop saving and enhance financial planning among members of society, noting that the saving rate was, until recently, among the low levels compared to the global average.

He said that the savings rate was around 2%, compared to a global average of about 10%, but financial awareness efforts over the past ten years contributed to a significant increase in savings, explaining that savings deposits rose from about 400 billion riyals about 6 years ago to more than 800 billion riyals currently.

He added that investment funds and other investment tools also contributed to enhancing savings awareness, in addition to the initiatives of the Ministry of Finance and Public Debt Management, which provided almost zero-risk tools with competitive returns in the market, which supported the growth of saving.

In the banking sector, Hafez explained that calculating the ratio of loans to deposits is not done simply by comparing loans with current deposits, pointing out that the calculation methodology of the Central Bank and central banks differs, and that some types of borrowing are involved in capital formation and play roles related to financing and supporting capital.

He pointed out that the ratio of loans to deposits in Saudi banks reached about 85% in August, and not, as some believe, the ratio of loans to current deposits exceeds 100%.

He stressed that current deposits represent an important source of financing, but they are not free, as they entail operating, management and maintenance costs, in addition to reserve requirements on every Saudi riyal deposited with banks.

He pointed to the diversity of bank financing sources, whether from deposits or borrowing between banks, as well as from the Central Bank through available financing tools.

Regarding the rise in the cost of some sources of financing, Hafez pointed out that banks do not look at these changes separately, but rather calculate the cost of funds with their various components, then add to them the margins that cover their costs and profitability.