Saudi Arabia raises spending in new deficit budget

Opec heavyweight Saudi Arabia on Tuesday announced an expansionary budget for 2019 but projected a shortfall for the sixth year in a row due to low oil prices.

The new budget comes with the oil-rich kingdom reeling under strong international pressure over the murder of journalist Jamal Khashoggi and the war in Yemen as it seeks to attract foreign investment to diversify its economy away from oil.

The world's largest crude exporter is also bracing for difficulties in 2019 as oil prices are expected to remain week after shedding a third of their value since early October despite producers having decided to cut output from January.

Saudi Arabia projects a deficit of $35 billion next year, or 4.6 percent of gross domestic product (GDP), about 32 percent lower than the estimated deficit of $52 billion for 2018.

Spending is estimated at $295 billion, the largest in the oil-rich kingdom's history, while revenues, mostly from oil, are estimated at $260 billion, up 24 percent on 2018 estimates, said a statement read by King Salman.

The kingdom, which has introduced economic reforms aimed at reducing its dependence on oil, has posted budget shortfalls each year since 2014 when crude prices crashed.

Between 2014 and this year, the accumulated budget deficits hit $313 billion, according to finance ministry figures. To diversify sources of income, the kingdom has increased the prices of fuels and electricity, imposed a five-percent value added tax (VAT) and levied fees on 11 million expatriates.

"We are determined to pursue economic reforms, control fiscal management, bolster transparency and strengthen the private sector," the king said in a brief statement to the cabinet.

Crown Prince Mohammed bin Salman, who is behind the Vision 2030 to reform the economy, said the government would continue to "diversify the sources of income and consolidate fiscal sustainability through boosting non-oil revenues."