Selected Issues


Selected Issues

Fiscal Frameworks and Fiscal Anchors: The Experiences in Commodity Exporting Countries and Implications for Saudi Arabia1

The implementation of fiscal policy in Saudi Arabia is undergoing significant change, but there is a need to further deepen reforms and ingrain fiscal consolidation into a framework that reduces the reliance of fiscal policy on volatile oil revenues and sets clearer medium-term fiscal objectives. An important question is whether the introduction of a fiscal rule as in some other resource-rich countries could help in fiscal management in Saudi Arabia. This paper suggests that while the government should continue to work on clearly defining its fiscal policy objectives, at this stage the focus of reforms should be to continue to strengthen the fiscal framework rather than on introducing a formal fiscal rule. A fiscal rule is only as good as the institutions that support it. Moreover, resource rich countries’ experiences with fiscal rules have been mixed as it has proven difficult to formulate rules which are simple, flexible, and robust that can withstand large commodity prices swings.

A. Introduction

1. Fiscal policy in Saudi Arabia, like in most resource rich countries (RRCs), plays a significant role in macroeconomic policy management. Traditionally, it focuses on three main objectives: macroeconomic stabilization, development, and intergenerational equity. The stabilization role typically aims at minimizing the impact of oil price volatility (and other shocks) on the economy by delinking government spending—the main driver of economic activity—from swings in oil revenues. The development role is manifested through spending on human capital and infrastructure, while the objective of saving for intergenerational equity is driven by the need to take into consideration the interests of future generations when using oil resources, given their non-renewable nature.

2. Fiscal developments in Saudi Arabia have been dominated by oil price developments over the last decades.

  • Government revenues and spending are highly correlated with the oil price (Figure 1). Oil revenues averaged 77 percent of total budget revenues and 27 percent of GDP since 1985. They declined to near 55 percent of total revenues when oil prices were low and reached over 93 percent during periods of high oil prices.

  • The volatility of oil revenues has translated into volatility of government spending, albeit to a lesser degree (Figure 1). The lower volatility of spending reflected in part constraints on reducing non-discretionary spending during periods of oil price slumps and increasing it during booms because of either absorption capacity or government policy to strengthen fiscal buffers. Government spending has also reflected the tendency to set annual budgets on the basis of conservative oil prices during oil booms—actual revenues have been on average much higher than budgeted revenues—and then overspend when prices turned out to be higher than budgeted. During the oil boom (2003–14), expenditure accelerated to an average yearly growth of 12.3 percent compared with an average growth of -0.7 percent during the low oil price period 1991–2002. The fiscal balance oscillated between large surpluses and deficits, ranging from a deficit of 25 percent of GDP in 1987 to a surplus of 30 percent of GDP in 2008.

Figure 1.
Figure 1.

Oil Price, Revenues, and Expenditures

Citation: IMF Staff Country Reports 2018, 264; 10.5089/9781484374382.002.A001

Sources: Country authorities; and IMF staff calculations.

3. Fiscal policy in Saudi Arabia has been generally procyclical compared to non-resource rich peers. Real GDP growth was higher (2003–17) when real government spending growth was also higher, driven by higher oil revenues and oil prices (Table 1). Further, the volatility of real GDP growth was higher in Saudi Arabia than in the G20 and was associated with larger volatility of real government spending growth—the latter largely driven by higher volatility of oil prices and their impact on the government budget. However, non-oil GDP growth volatility was lower in Saudi Arabia than in other oil and primary product exporters, reflecting the respective lower volatility of the growth rate of its real government spending. The decline of the latter in recent years may be reflecting relative improvement in its fiscal management. Moreover, Saudi Arabia has been more successful in controlling inflation. This, if anything, appears to highlight the importance of the currency peg, which has been the main nominal anchor for the Saudi economy.2

Table 1.

Output, Government Spending, and Inflation

(Annual growth in percent)

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Sources: Country authorities; and IMF staff calculationsNote: Figures shown are the medians across country groups.

Oil Exporters includes the following countries: Algeria, Angola, Azerbaijan, Bahrain, Bolivia, Brunei Darussalam, Republic of Congo, Ecuador, Equatorial Guinea, Gabon, Iraq, Kazakhstan, Kuwait, Libya, Nigeria, Oman, Qatar, South Sudan, Democratic Republic of Timor-Leste, Trinidad and Tobago, Turkmenistan, United Arab Emirates, Venezuela, and Yemen.

Primary product exporters are emerging markets and developing economies where 50 percent or more of the value of their total exports were a primary commodity (SITC codes, 0,1,2,4 or 68) on average between 2012 and 2016.

4. To counter oil price volatility and the high reliance of the government budget on oil, Saudi Arabia has embarked since 2015 on a bold and comprehensive fiscal reform agenda. This has been based on a series of reforms to boost non-oil revenues, reduce energy subsidies, and rationalize spending which has fallen significantly from its peak in 2014. The government has set a target of balancing the budget by 2023 and of not having central government debt exceed 30 percent of GDP. It has also started to focus on strengthening the budget process and expenditure management.

5. Against this background, this paper looks at the potential role that fiscal rules could play in strengthening fiscal management in Saudi Arabia. Its main conclusion is that while the government should continue to work on clearly defining its fiscal objectives, at this stage, the focus should be on reforms to strengthen the fiscal framework (strengthening fiscal strategy planning, enhancing fiscal reporting and monitoring, and strengthening budget execution) rather than on introducing a formal fiscal rule. The paper is organized as follows. Section B discusses resource rich countries’ experiences with fiscal rules. Section C discusses ongoing public financial management (PFM) reforms and the strengthening of fiscal institutions in Saudi Arabia. Section D reviews options and challenges for designing a fiscal rule for Saudi Arabia, drawing on lessons from RRCs’ experiences, and Section E concludes.

B. Resource Rich Countries’ Experiences with Fiscal Rules

6. In general, fiscal rules should be simple, flexible, and consistent with the ultimate goals (Kopits and Symansky, 1998). However, defining a rule entails striking a balance among several desirable objectives:

  • Simplicity and flexibility: a rule could be based on cyclically adjusted variables allowing room for automatic stabilizers to operate. However, this is challenging in countries like Saudi Arabia, as it would require identifying the position of the economy in its cycle, when the economic cycle is not well-established because of the dependency on oil revenue/prices.

  • Macroeconomic stability: stabilizing macroeconomic fluctuations, by preventing fiscal policy from following a boom-bust cycle, as oil prices rise and fall, or as production volumes change.

  • Resilience: by promoting the accumulation of fiscal buffers when commodity prices are high, to support a gradual approach to any required adjustment when commodity prices fall.

  • Robustness: the rule can withstand resource and other shocks, including through use of buffers or temporary implementation of a well-defined escape clause for large shocks; and

  • Sustainability: the rule ensures the preservation of (or gradual progress toward) sustainable deficit and debt levels in the face of gradual resource (revenue) depletion.

7. Successful implementation of fiscal rules is generally preceded by a period of fiscal consolidation (IMF, 2009, Debrun and Kumar, 2007). Although the introduction of fiscal rules has usually concurred with improved fiscal performance, the causality is not clearly established (IMF 2005, OECD 2001). International evidence suggests that the key to successful fiscal policy lies in factors that change the political climate in favor of fiscal sustainability. The prevalence of national fiscal rules is found to be positively associated with the extent to which fiscal targets were met (IMF, 2005, 2009, 2010).

8. Fiscal rules in RRCs have the potential to prevent excessive deficits, smooth shocks, and address intergenerational equity challenges, particularly when supported by strong institutions. RRCs face a difficult challenge as commodity prices experience large and persistent shocks, which can hamper fiscal planning through large, and sometimes unpredictable, fluctuations in their resource-related revenue. To cope with these challenges, resource-rich countries have tried to strengthen their fiscal framework including by using different types of fiscal rules (see Annex 1).

9. Experience with fiscal rules in RRCs has been mixed, however, owing to flawed design and weak institutional arrangements (IMF, 2015). The application of fiscal rules has been complicated by weak PFM and lack of comprehensive and consistent frameworks (rules, buffers, escape clauses). The large fall in commodity prices in 2014 led all RRCs with large financial assets to use them to smooth the adjustment regardless of fiscal rules when those were present. In particular, experiences have shown that:

  • Fiscal rules need to be supported by strong institutions, which are not always in place. This includes adequate budget planning and monitoring, strong public financial management, and broad political and social support (IMF, 2012, 2015). Strong fiscal institutions and frameworks are critical to the extent they would provide operational guidance on how to deal with volatile resource revenues—translating long-term objectives into annual budgets and then holding policymakers accountable for meeting them. Such systems include developing a medium term fiscal framework, a more risk-based approach to fiscal policy to enhance management of fiscal risks, and strengthening fiscal transparency, which would enable informed understanding and scrutiny, and thus enhanced accountability (for example, Chile and Norway).

  • Many RRCs have had a history of short-lived rules, and/or prolonged periods of suspension of their applications. Some countries had to either change their rules or strengthen them in the aftermath of the global financial crisis (Ecuador, Russia, CEMAC). Some abandoned the application of their rules after the commodity price collapse of 2014, and many have a mixed track record in adhering to them.

  • Price smoothing rules have not coped well with large and persistent commodity price shocks. Some RRCs set up price smoothing rules where commodity prices used for budget purposes are a moving average of past (and future) prices (Mexico and Russia). These rules, while attractive for their ability to reduce the effects of short-term price volatility on the budget, did not work well when commodity price shocks were persistent/not mean reverting (IMF, 2015).

  • Structural balance rules have been effective for less resource-dependent countries, although they have some vulnerability to large shocks. They have been used by countries including Chile and Colombia, and provide a similar guidance as price-smoothing rules, but are more comprehensive as they encompass the whole budget framework and not just revenue. Well-designed structural rules can withstand large shocks much better than price smoothing rules. However, the challenge is how to calibrate them to achieve large buffers during booms. Countries that have been successful implementing these rules tended to have strong fiscal institutions (Chile) and more diversified economic structures which are less dependent on resource revenue.

  • Non-resource primary balance rules can offer a possible framework, but their use by RRCs has not been always effective. Countries that target the non-resource (primary) balance (Botswana, Ecuador, Equatorial, Guinea, Norway, Russia, Timor-Leste), have, in principle, a framework to formulate a medium-term fiscal policy. These rules have been sometimes accompanied (or later supplemented) by a ceiling on expenditure to strengthen the budget rule and further avoid procyclical policies (Botswana, Ecuador, Russia). However, these rules have not always been effective to guard against large shocks because of shortcoming in escape clauses or limited buffers.

  • Sovereign Wealth Funds (SWFs) have been effective stabilization instruments, but ad-hoc uses can hamper their investment-for-future-generations function.3 While not necessarily part of fiscal rules per say, SWFs have been used as a mechanism to save part of oil revenues. However, problems can arise if the accumulation and withdrawal rules from the SWF are too rigid and disconnected from overall fiscal targets. In the aftermath of the oil price collapse, commodity exporters that had buffers in their SWFs used them to smooth the adjustment and avoid exchange rate pressures, but this use was not always governed by a clear fiscal rule (Algeria, Azerbaijan, Iran, Kazakhstan, Kuwait, Qatar, and UAE). This led in some cases to conflicts between the stabilization need and the intended investment for future generations. In Saudi Arabia, government deposits at the central bank played this buffering role, as they were used to smooth the fiscal adjustment. Another typical problem with SWF is that some countries accumulate assets with low returns while they borrow expensively to finance fiscal deficits. SWFs are, however, best used when they are set up as financing instruments funding the budget either for stabilization or long-term financing purposes (IMF, 2015), and have no spending authorities (to avoid the creation of extra-budgetary funds that would perform quasi-fiscal operations without proper oversight from fiscal authorities).

10. International experiences highlight some key lessons that influence considerations of how an effective fiscal rule could be introduced in Saudi Arabia:

  • A strong institutional environment will be critical. Fiscal rules would need to be supported by a strong medium-term fiscal framework, a robust public financial management system, broad enough coverage of the government sector, and transparency and independent oversight. Ultimately, the underlying fiscal framework needs to ensure that the government can deliver on its fiscal objectives—if the PFM system, for example, is not robust enough to deliver close to the government’s intended budget, it will be very difficult to implement a credible fiscal rule.

  • A rules-based framework can be used to guide the government’s savings objectives. The fiscal rule(s) would primarily be designed to provide buffers to guard against shocks and potentially achieve a longer-term goal of saving for future generations.

  • Buffers and escape clauses are crucial, as the likelihood of triggering them is much higher than for non-RRCs. Buffers are needed to insure against risks (including to some degree large oil price shocks) and avoid abrupt adjustment that could otherwise be unnecessarily disruptive. Most escape clauses are primarily about triggers that would warrant the suspension of the rules in cases of tail risks, and the process to return to their application after the commodity price shock.

C. Institutional Considerations: What is Required Versus What Is There?

11. A strong institutional framework for fiscal policy is key to successfully implement a fiscal rule (Box 1). Saudi Arabia could therefore gain from further deepening reforms underway to strengthen its fiscal framework and PFM practices before considering the adoption of a fiscal rule. Reforms would focus on having its fiscal strategy within a medium-term fiscal framework, improving the budget process and fiscal institutions, enhancing spending execution, and improving transparency and accountability. These reforms, while crucial on their own merits, are prerequisites for successful implementation of a fiscal rule (IMF 2009, 2015).

Strengthening Fiscal Strategic Planning in Saudi Arabia

12. The budgetary process in Saudi Arabia has traditionally followed a bottom-up process. This started with a circular from the Ministry of Finance (MoF) to line ministries referring them to the Budget Preparation Manual which contained instructions to submit spending proposals for the next year. The circular was accompanied by an aggregate expenditure target that guided the process, without specifying a ceiling by entity. Ministries’ spending proposals contained information on financial costs, but not on their objectives, making the process for prioritizing expenditures at the aggregate level more difficult. Negotiations on current spending were informed by past costs, while the assessment of new capital projects was guided by the five-year development plans, with limited or no guidance on expenditure ceilings. In sum, decision-making focused on the inputs of the programs and followed an incremental approach (Joharji and Willoughby, 2014).

Fiscal Strategic Planning

The first step to strengthen PFM is to shift to a strategic planning approach in the conduct of fiscal policy. This involves projecting fiscal variables over the medium-term while combining different fiscal policy objectives. Given a set of macroeconomic forecasts, revenue and spending levels (as well as their composition) are determined, striking a balance between sustainability, short-run stabilization of real activity, and efficiency in resource allocation.

The outcome of this process is a set of short and medium-term fiscal objectives. These are operationalized through a medium-term budget, and delivered through the annual budget process. This results in a cascading decision-making process by which fiscal objectives combined with medium-term fiscal forecasts determine aggregate expenditure envelopes or ceilings. These are then allocated among policies and sectors through the budget process, most effectively over a medium-term horizon (Ljungman, 2009). This top-down approach ensures that budget allocations are kept in line with the fiscal and macroeconomic objectives. In contrast, a bottom-up approach to budgeting is likely to fail in delivering the government’s fiscal objectives as it is based on expenditure plans/demands of ministries, which usually produce incremental trends without consideration of government priorities and fiscal sustainability.

A medium-term perspective to fiscal planning is particularly important in resource rich countries. Fiscal planning over a medium-term horizon helps prevent volatile annual revenues from translating into expenditure fluctuations that may destabilize the economy and reduce the quality of government spending. During upturns, these frameworks can help governments resist the pressure to increase spending when revenues and surpluses are high and to protect priority expenditures and maintain the strategic focus of fiscal policy in downturns. Setting and adhering to medium-term spending plans increases the chances that short-term spending pressures do not jeopardize long-term strategic fiscal objectives.

This approach entails a broader framework for fiscal policy and budgeting, comprising:

• A medium term fiscal framework (MTFF) which lays out the overall quantitative fiscal objectives in terms of the fiscal balance, the debt level or net worth, for 3–5 years, and demonstrates the consistency of the government’s policies with those objectives given projected macroeconomic variables, oil prices, and demographics.

• A fiscal policy strategy (document) which translates the MTFF into a statement on medium fiscal policy priorities.

• A medium-term budget framework (MTBF) setting out the government’s expenditure plans and objectives in multi-year perspective.

• The annual budget, which remains the basis for legal appropriations of expenditure but should be consistent with all of the above.

MTFFs are mechanisms to formulate multi-year fiscal objectives and ensure that the government will target them in budget preparation, approval, and execution. They contain commitment, reporting, and accountability requirements for the medium-term aggregate fiscal objectives, such as debt ceilings, fiscal balance targets (surplus/deficit), or broad expenditure ceilings. They are formally based on a set of medium-term macroeconomic and highly aggregated revenue and expenditure projections, which represent the core of the top-down process. The aggregate expenditure ceilings reflected in the MTFF will be the starting point of the multi-year allocation process between sectors, programs, or administrative units.

MTBFs translate MTFFs into medium-term revenue projections and disaggregated expenditure limits. The fiscal strategy provides very broad direction and targets for fiscal policy. The MTBF fleshes out the fiscal strategy by providing disaggregated quantitative projections of how the government will achieve its fiscal objectives. Expenditure allocation can be binding for a limited number of years within the projection horizon (and indicative for the rest). MTBFs pursue the sustainability of public finances, the effectiveness of resource allocation among sectors, and a more efficient use of resources by budget managers (Harris et al. 2013).

The conversion of the MTFF aggregates into MTBF binding medium-term expenditures will require reconciling top-down and bottom-up approaches. Aggregate expenditure ceilings are determined using deficit objectives and revenue projections in the MTFF. These ceilings are compared to MTBF forward estimates (aggregate medium-term ministerial, sectoral, of program expenditure projections) at current policies. The gap between the expenditure ceiling and forward projections, together with policy priorities, guides the allocation of the expenditure ceiling between ministries or entities in charge of programs. This (iterative) allocation process is conducted through discussions between the Ministry of Finance and budget entities which provide bottom-up expenditure proposals and savings options taking into account ceilings by entity.

13. Vision 2030 kicked off the transition towards a top-down approach in budget preparation. The Fiscal Balance Program (FBP) fostered a modern and more strategic culture of budget planning, and provided a medium-term fiscal anchor. The FBP committed to reducing the budget’s reliance on oil revenues and the responsiveness of public spending to oil prices, including controlling its growth during booms. To underpin this commitment, the Bureau of Capital and Operational Spending Rationalization (BSR) was created and flesh out specific savings targets for operational and capital expenditures until 2020. Government ministries and entities have also set key performance indicators (KPIs), and a national performance monitoring agency (Adaa) was established to monitor their progress.

14. The new fiscal framework required important organizational changes in MoF, and in the coordination mechanisms with line ministries. The MoF adopted a Strategic Plan in early 2017, encompassing the main organizational and procedural reforms to the budget process to effectively implement a top-down approach. The Fiscal Balance Program Office (FBPO) took the lead in preparing the initial medium-term fiscal strategy. During 2017, the FBPO worked closely with the Macro Fiscal Policy Unit (MFPU), and collaborated with other relevant departments in MoF, updating the medium term fiscal strategy through 2023. This framework was used as the basis for preparing the 2018 budget.

15. The MFPU plays an important role, working closely with the FBPO, in the preparation of the fiscal strategy update and the medium-term budget framework (MTBF). Macroeconomic forecasts are provided by the MFPU and are discussed with other stakeholders (including the Ministry of Economy and Planning (MEP) and SAMA) in benchmarking exercises based on common assumptions. The MFPU also provides revenue projections linked to its macroeconomic forecast, while the non-oil revenue department delivers revenue estimates for the non-oil revenue measures in collaboration with revenue collection agencies. Projections are then reconciled and a single revenue forecast is used as a basis for the new budget and medium-term projections (MTFF & MTBF). The agreed fiscal objectives and expenditure ceilings are used by the MFPU in a second iteration to align macroeconomic forecasts with the fiscal policy path. The medium term fiscal strategy currently covers 3 years (2018–20), although MOF has revenue and expenditure projections through 2023.

16. The government is also developing a financing strategy. Past fiscal surpluses explain the lack of a financing strategy in Saudi Arabia before 2014. A borrowing plan to finance the fiscal deficits is designed and managed by the Debt Management Office (DMO) and approved by the Ministry of Finance. This plan includes the distribution of financing between new net issuance of public debt (target) and the drawdown of government deposits at SAMA. However, the MTFF should be based on a broader asset-liability management framework that is consistent with the macroeconomic policy objectives under Vision 2030.

17. Going forward, reforms should include:

  • Using more effectively macroeconomic projections to better inform the setting of aggregate and entity expenditure ceilings. While expenditure ceilings were set for the first time in 2018, a full reconciliation with the bottom up estimates of line ministries was not possible. For 2019, the budget process started early in the year with the Budget Deputyship using expenditure ceilings set in 2018 budget by economic classification. Guidance ceilings were provided to entities around late January, informed by previous entity allocations and the new expenditure ceiling. The determination of the final ceilings for the 2019 budget will for the first time reflect discussions that take account of MoF provided guidance ceilings, possible savings (discussed in workshops with experts), and the contribution to Vision Realization Initiative programs. Once final ceilings (plus or minus ten percent of guidance ceilings) are agreed, a consolidated budget draft should be prepared before July.

  • Developing forward estimates and costing methodologies to further enhance the credibility of the MTBF. Forward estimates are crucial for expenditure forecasts at current policies, while costing methodologies are used to assess the cost of new programs and projects. Without these, the determination of expenditure ceilings is likely to be more arbitrary and may result in either insufficient or excessive budgetary allocations. Moreover, the lack of these methodologies increases the risk of discretion by line ministries in their bottom-up estimates and reduces the assessment capacity of MoF. Therefore, the development of these methodologies is crucial to help mitigate the informational asymmetry, which would improve the credibility of the MTBF and strengthen the quality of resource allocation among ministries.

  • Introducing preventive mechanisms to ensure compliance with the MTBF. The following could be considered:

    • ✓ Designing, together with the baseline MTBF, alternative paths supported by contingent revenue and expenditure measures to gradually return to medium-term fiscal objectives if deviations are impossible to avoid;

    • ✓ Maintaining a regular update of the medium-term macroeconomic and fiscal projections;

    • ✓ Building contingent reserves calibrated by historical deviations of expenditure or the volatility of relevant macroeconomic variables;

    • ✓ Leaving room under the ceilings (at the entity levels) to accommodate expected (but not yet included) expenditure commitments.

    • ✓ Limiting expenditure carryovers between consecutive years;

  • Improving the MTBF with a better risk analysis. Saudi Arabia has traditionally incorporated a contingent reserve in its budget, but its size was not informed by a risk analysis or study of past macro-fiscal forecasting errors. The 2018 Budget Statement included for the first time a qualitative risk statement, pointing to most likely factors that might cause deviations from forecasts. Embedding this type of risk analysis in the MTFF and MTBF will help with the adoption of mitigation measures that would improve compliance. Information on, and systematic monitoring of, macro-fiscal SOE-related risks and other contingent liabilities are indispensable to complement the top-down approach.

Fiscal Reporting and Monitoring

18. Fiscal Strategy Reports (FSR) and updates are key instruments to lay out changes in the fiscal strategy and strengthen transparency and accountability. During the first half of the year, the government needs to produce, and ideally publish, a strategy update that highlights the changes with respect to the previous strategy and revisions to the way forward. This document defines the MTFF, including expenditure ceilings. An end-of-year report (EYR)—which usually precedes the strategy update (SU)—assesses the final consolidated fiscal accounts of the previous year, including detailed assessment of the compliance with the fiscal strategy. In most countries, the EYR and the SU are released to the public in the first half of the year.

19. Saudi Arabia has made good progress in improving fiscal monitoring and reporting. An internal strategy update was produced for the first time in 2017 in the form of a similar document to a Pre-Budget Statement (PBS) in other countries. The strategy update was produced and distributed internally in October. It included a description of the new fiscal strategy of the government and a basic MTBF, with an economic classification of revenue and expenditures at three digits according to GFS 2014. The MFPU also prepared in-year execution reports for the government starting in 2017. With inputs from the Non-Oil Revenue, the General Budget Department, and the DMO, the MFPU produced two reports: a monthly Fiscal Monitoring Report (FMP) and a Quarterly Budget Performance Report (QBPR); the latter being published. The fiscal strategy update 2019–21 will help fine-tune the expenditure ceilings for Budget 2019. Most countries try to align as much as possible the update of their annual strategy with the start of the budget preparation for the following year to maximize the reliability of expenditure ceilings.

20. Further reforms could include:

  • Strengthening the analysis within the Pre-Budget Statement (PBS) and FSR, including:

    • ✓ A discussion of alternative fiscal paths and their characteristics (currently there are only two scenarios: the baseline scenario which includes the reforms and an alternative scenario of no reforms);

    • ✓ A clear analysis of the contribution of next year’s fiscal objectives to the medium-term fiscal strategy objectives, with emphasis on debt accumulation drivers; and

    • ✓ An across-year analysis explaining the reasons of the differences between the previous year’s and the updated strategy.

  • Considering the adoption of a Fiscal Responsibility Law (FRL). FRLs are used by some countries to reinforce the credibility of fiscal frameworks. They are limited-scope laws that elaborate on rules and procedures relating to three budget principles: accountability, transparency and stability (Lienert, 2010). A significant number of countries have adopted FRL (Australia, New Zealand, UK, Peru, Chile, Norway, Spain, India, Brazil, Ecuador, Argentina).

Reforms to Strengthen the Budget Execution Framework

21. Implementing a credible budget execution requires a concerted effort in a wide range of areas, from the budget planning phase through its ex-post evaluations. This includes: providing (programs with) sufficient budget appropriations; developing a reliable cash-flow forecasting and management system; implementing commitment controls; preparing frequent in-year execution analytical fiscal reports (above); and, ensuring a transparent application of internationally standardized accounting practices.

22. Saudi Arabia has made important progress towards meeting these best practices, but more reforms could be considered, including to:

  • Strengthen expenditure commitment controls. Weaknesses in this area contributed to the buildup of arrears in the last few years as the government tightened budget execution to reduce spending in line with the required fiscal adjustment. To better control spending starting with the commitment stage, the MoF has recently introduced new initiatives including an electronic portal, Etimad, for managing project contracts.

  • Treasury single account (TSA). The MOF has among its strategic objectives the implementation of a TSA. This will help in quantifying (and pool) cash availabilities to implement budgeted policies and improve cash forecasting. It will also strengthen the control over budget appropriations and improve execution data quality.

  • Tighten rules for approving and offsetting supplementary appropriations. Saudi Arabia uses a number of control mechanisms on supplementary appropriations (see Johari and Willoughby, 2014 and Eid, 2015). Reforms to strengthen the application of these controls should include imposing more stringent restrictions on requests to increase appropriations mid-year, including ruling out the adoption of new programs or expansion in the coverage of existing ones, and not permitting requests for large changes in cost driving parameters in programs. Equally important, increases in appropriations of discretionary spending should be capped or required to be offset by reductions in other expenditures, keeping total deficit unchanged.

  • The government is gradually adopting GFSM 2014, but its coverage should be expanded beyond the budgetary central government. Data for the budgetary central government has been published in GFSM2014 format and the authorities envisage a gradual transition to broader government coverage to be completed in 2020. The current coverage leaves out important spending units such as the Public Investment Fund, Aramco, the pension funds and the specialized credit institutions that carry out fiscal functions and could have risk implications for the government’s balance sheet. Similarly, subsidized agencies and SOEs might also become a source of fiscal risks.

D. Thinking About a Fiscal Rule in Saudi Arabia

Outlining a Fiscal Anchor for Saudi Arabia

23. The first and fundamental question before the government when deciding on a fiscal anchor is defining the long-term objective this anchor would aim to achieve. The government has already set the objective to achieve fiscal balance by 2023. While this is a crucial and necessary step to reduce fiscal risks and restore long-term sustainability, it does not guide policy making beyond 2023. Further, the government objective to achieve fiscal balance by 2023 will be importantly influenced by oil price developments in coming years, and thus could be easily achieved or challenged, depending on the direction and magnitude of oil price changes. Therefore, there is merit in thinking of longer term fiscal objectives which exclude oil revenues from the fiscal target.

24. If the government objective is to save some of the exhaustible oil resources for future generations, a long-term fiscal anchor could be defined around a framework that ensures such savings. Such frameworks could range from an approach that allows spending only from the return on actual financial wealth (the “Bird-in-the-Hand” or “Norwegian” model)—which implies considerable savings upfront, to more flexible use of oil revenues for current spending (e.g., front loading spending)—which exposes the government budget to higher risks (especially uncertainty of oil prices) (Annex 1).4 If the former were employed after 2023, it would entail a very large upfront adjustment and would constrain the fiscal space available to support the diversification efforts and structural transformation. Assuming a 5-year adjustment period before the rule is implemented (i.e. rule starts in 2028), the non-oil primary deficit would need to be reduced to around 3 percent of non-oil GDP by 2028, as only the return from the actual financial wealth would be used for budget financing. Once the economy has adjusted to the much lower deficit level compatible with the bird-in-hand, the non-oil primary deficit starts to increase as returns increase with the accumulation of financial assets (leveling at an average of about 6 percent of non-oil GDP in the following 12 years through 2040) (Figure 2). In contrast, a strategy to gradually converge to a long-term norm based on the permanent income hypothesis (PIH) would entail a more gradual continuing adjustment after 2023 to a non-oil primary fiscal deficit of about 17 percent of non-oil GDP by 2028, and an average of 14 percent of non-oil GDP during 2028–40 (Figure 2).5

Figure 2.
Figure 2.

Options for a Long-Term Fiscal Anchor

Citation: IMF Staff Country Reports 2018, 264; 10.5089/9781484374382.002.A001

Sources: Saudi Arabian authorities; and Fund staff estimates and projections.

25. If the authorities are concerned about insulating fiscal policy against oil price swings, the focus will be more on establishing buffers that provide sufficient insurance against possible price drops. Given the uncertainty of oil prices dynamics,6 the required policy buffer could be assessed along the following lines:

  • Empirical analysis of oil price forecast errors (deviation from projections) up to 3 years ahead over the past 20 years shows that (using WEO oil price forecast), on average, about 60 percent of one-year-ahead forecast errors of oil prices are relatively small (around +/- 5½ percent), while the remaining forecast errors are much higher, with deviations from the initial forecast of +/- 40 percent.

  • Such errors (deviation from projections) have significant implications for Saudi Arabia given the large share of oil revenues in total budget revenues. Saudi Arabia would need buffers to: (i) absorb small shocks (a deviation of prices of about 5½ percent represents, based on 2017 oil revenues, a shock of about 1¼ percent of non-oil GDP), and (ii) smooth, to the extent possible, the impact of large shocks (a deviation of 40 percent represents a shock of about 9.5 percent of non-oil GDP). In this regard, smoothing the adjustment to large shocks is particularly important to avoid/minimize disruption to economic activity, for example, by stopping investment projects (which has been a source of low efficiency of public spending, IMF, 2015).

  • The size of the needed buffer (proxied by the expected oil revenue loss over a given period due to an oil price shock) would depend on the degree of risk aversion and the extent of the insurance the government would want to have against such shocks. For example, a simulation based on WEO oil price forecast errors at end-2011 and end-2013—using the cumulative deviation of oil revenues under a (three-year) shock scenario from projected baseline oil revenues for Saudi Arabia based on WEO prices—shows that a buffer of about 50 percent of non-oil GDP in 2011 (about 40 percent of non-oil GDP in 2013) would be needed to cover: (i) small shocks that would extend over a three-year period (the assumed horizon of the medium-term fiscal framework); plus, (ii) potential small shocks beyond the medium-term horizon (an extra two years in this example) in case all buffers for the medium-term would have been used, and (iii) a partial cover (up to 50 percent) of a large shock. However, double the above buffers—100 percent of non-oil GDP in 2011 (about 80 percent of non-oil GDP in 2013)—would have been needed to cover the totality of a large shock (Figure 3). These scenarios assume no adjustment in government spending from its pre-shock level.

  • Actual data shows that Saudi Arabia’s net financial position (GNFA) at end-2011 would not have been sufficient to cover the above simulated large 2011 shock, while its GNFA at end-2013 would have been more than sufficient to cover the end-2013 one (Figure 3). The government buffer measured by its actual net financial position (GNFA) at those respective dates, was 77 percent of non-oil GDP and 96 percent of non-oil GDP, respectively.

Figure 3.
Figure 3.

Options for Fiscal Buffers

Citation: IMF Staff Country Reports 2018, 264; 10.5089/9781484374382.002.A001

Sources: Saudi Arabian authorities, and IMF staff estimates.

Translating Policy Objectives into Operational Fiscal Rules

26. If the government is interested in reducing the volatility of government spending and the tendency that expenditure increases/decreases with oil revenues, then a non-oil primary deficit rule or an expenditure rule may help. The advantages and disadvantages of these rules are outlined in Table 2.

Table 2.

Operational Fiscal Rules

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27. A non-oil primary deficit rule would set a cap on the maximum deficit allowed. This rule excludes oil revenues from the fiscal policy target, and as such, it provides a more accurate measure of the fiscal stance (i.e., whether the fiscal stance is expansionary of contractionary). It also helps set fiscal policy into a longer-term horizon to the extent that the magnitude of the non-oil primary deficit highlights the risks stemming from current policies on long-term fiscal sustainability, particularly in case of a sudden drop in oil prices (oil revenues). In this manner, the non-oil primary balance helps ensure a sustainable fiscal policy framework and is most useful to control the expansion in government spending—if not matched by an increase in non-oil revenues—during periods of increasing oil prices. Russia used a non-oil deficit rule in 2008, but suspended it at the time of the financial crisis as the rule was deemed too constraining (Annex 1). Figure 4 considers how a slightly dynamic (more flexible) non-oil deficit cap could have worked in Saudi Arabia during 2004–14. Specifically, the increase in the non-oil primary deficit is capped under the rule at the previous year’s deficit plus the nominal equivalent of 2 percent of non-oil GDP. Given that oil prices were rising during that period, the rule would have reduced the volatility of fiscal policy by limiting the increase in the non-oil primary fiscal deficit in several years, and over the whole-time period, would have generated cumulative savings of about 18 percent of non-oil GDP. A different specification of the rule could have resulted in larger or smaller cumulative savings while maintaining the benefits of reduced volatility. A different non-oil deficit rule could support fiscal consolidation efforts, and subsequently the achievement of a long-term anchor such as the PIH, but the difficulty of calibrating a rule that it is robust to different economic environments is clearly evident in this discussion.

Figure 4.
Figure 4.

An Illustration of a Non-Oil Deficit Rule

Citation: IMF Staff Country Reports 2018, 264; 10.5089/9781484374382.002.A001

Sources: Saudi Arabian authorities; and IMF staff estimates.

28. An expenditure rule would limit the procyclicality of fiscal policy during oil price booms by setting a cap on expenditure growth. A rule capping the annual growth of government spending easily aligns with the budget process and medium-term fiscal planning. A simple form of such a rule (where expenditure growth is set not exceed non-mineral growth) is used in Mongolia in combination with a budget balance rule and a debt ceiling rule (Annex 1).7 While the deficit rule has the advantage of adhering well to the long-term anchor, positive oil price shocks can trigger a boom in the non-oil sector, enabling the deficit rule to be met even if spending increases strongly. This risk would likely be higher in the future in the case of Saudi Arabia given recent reforms to boost non-oil revenue. In the illustrative example below, the growth rate of government spending is limited to nominal non-oil GDP plus ½ percent. Under this rule, the path of spending would have been much smoother during 2004–14 (Figure 5). The additional cumulative saving under this rule are virtually the same as with the non-oil deficit rule, with cumulated savings of 17 percent of non-oil GDP (Figure 5). Given the difficulties of forecasting non-oil GDP in Saudi Arabia, more practically the spending cap could be linked to last year’s GDP or a longer-term average.

Figure 5.
Figure 5.

An Illustration of an Expenditure Rule

Citation: IMF Staff Country Reports 2018, 264; 10.5089/9781484374382.002.A001

Sources: Saudi Arabian authorities; and IMF staff estimates.

29. Another approach to limit the procyclicality of fiscal policy is a structural balance rule. This rule calibrates government spending according to the long-term trend in oil prices. Structural spending is set to equal structural revenue, with the latter being equal to the structural oil revenue plus the non-oil revenue (where the structural oil revenue is calculated on the basis of a moving average of oil prices over an extended period). The structural balance is then measured by the difference between the structural revenue and actual revenue. Two versions of this approach were applied in the 2017 Article IV.8 The first one was based on a five-year backward looking moving average of oil prices, and the second on a backward-forward eight-year moving average of oil prices (using the four preceding years, the current year, and the forthcoming three years). The (counterfactual) simulation showed that the rule could be very useful in reducing the cyclical behavior of government spending in response to short term swings in oil prices. However, it does not enable a clear assessment of the pace of fiscal consolidation, as the outcome of the rule depends on the type and time span of the moving average oil prices being used.

30. Strengthening a fiscal rule with a debt brake—central government net financial asset (CGNFA) break in the case of Saudi Arabia—to protect sustainability during downturns could also be considered. As discussed before, any fiscal rule would be challenged by negative and large shocks to oil prices. Some instruments such as debt breaks (or the equivalent of debt-brakes) can provide adequate flexibility, while also taking into consideration fiscal sustainability. This would fully incorporate policy buffer considerations in the fiscal rule. The equivalent of a debt brake could, for example, set a floor on net financial assets of the central government (CGNFA), so that when they fall below a threshold, automatic adjustment measures kick in to reduce spending and increase GNFA.

E. Conclusion

31. The implementation of fiscal policy in Saudi Arabia is undergoing significant changes. The government has introduced policies to reduce the large fiscal deficit, strengthen the budget process and the fiscal framework, and increase transparency. To guide its fiscal adjustment, it has set itself a target of balancing the budget by 2023 and of not having central government debt exceed 30 percent of GDP. The steps being taken are an important start, and now there is need to deepen reforms and ingrain the gains of fiscal consolidation into a framework that increases resilience to oil price shocks.

32. One key question before the government is to define its long-term fiscal policy objectives beyond 2023. This will help determine how it may want to anchor fiscal policy. While a target for the overall balance, as announced in the FBP, is a reasonable objective for the next 5 years, such a target may not deliver the longer-term fiscal goals of the government. It is also subject to swings in oil prices—it may not be achievable if oil prices decline significantly, but if oil prices were to increase substantially, the target could be achieved even if spending were to increase to such a level that increases future fiscal vulnerabilities. Therefore, it would be better to formulate fiscal policy objectives in terms of the primary non-oil balance rather than the overall balance. The debt-to-GDP target also needs to be consistent with the fiscal balance target and with an appropriate financing mix. While the government can drawdown assets, it will likely be able to keep debt below 30 percent of GDP, but it is not clear this is optimal without a detailed asset-liability framework in place. Setting a target level for net financial assets consistent with the fiscal balance target would be a better objective.

33. The eventual introduction of a fiscal rule could potentially help the government achieve its fiscal policy goals, but the focus should be first on strengthening fiscal processes and fiscal institutions. The international experience with fiscal rules has been mixed in resource rich countries. While there have been successes, it has proven difficult to formulate rules that are simple, flexible, and robust, particularly in periods of large swings in commodity prices. For this reason, at this stage it would be better for Saudi Arabia to focus first on continuing to strengthen its fiscal planning and implementation framework to help it deliver on its planned fiscal objectives rather than introducing a formal rule which may be difficult to implement. A fiscal rule is only as good as the institutions that support it.

34. Greater focus needs to be given to strengthening budget execution. Having both a MTFF and MTBF are crucial for developing an informed and long-term vision for efficient fiscal policy implementation. However, their usefulness will be limited in the absence of well informed and disciplined budget execution. Thus, the importance of developing the required tools for budgetary implementation and monitoring, including commitments control, the TSA, and other rules governing expenditure reallocation, reporting, and audit.

35. In thinking about its fiscal policy objectives and a possible fiscal rule, the government will have to balance short-term macro-management, medium-term development, and longer-term saving goals.

  • If, recognizing the exhaustible nature of its oil resources, the government wants to increase saving of the revenues from oil resources for future generations, then it will want to pursue larger fiscal surpluses in the future.

  • If it’s primarily focus is to insure fiscal policy against oil price shocks, then it will want to rebuild sufficient fiscal buffers to be able to smooth fiscal policy adjustment following shocks over the short-to-medium term and mitigate its adverse effects on growth and employment. This objective would imply rebuilding over the medium-term the fiscal buffers used during the past several years, and thus the need to return after 2023 to fiscal surpluses, although these could be smaller than under the intergenerational equity option.

  • Fiscal policy also plays an important demand management role in the economy, and reducing volatility is an important objective. A non-oil primary balance or an expenditure growth rule could help reduce the volatility of fiscal policy and strengthen macroeconomic stability as well as long-term fiscal and external sustainability.

  • It is important to recognize, however, that pursuing these goals will have costs and benefits and there will be trade-offs among the ambition of the target, the longer-term benefits, and the potential short-term costs.

Annex I. Fiscal Anchors and Rules in Selected Resource Rich Countries1

1. Norway. Norway established a fiscal framework to manage its oil revenues in 2001. The fiscal rule ties the non-oil fiscal deficit to the investment income of the sovereign wealth fund (SWF). Net cash flows from oil and gas are transferred to the SWF to accumulate financial assets and the government can use only the yield from these assets for spending. The rule sets a ceiling on the non-oil primary deficit not to exceed 4 percent of the accumulated financial wealth, which corresponds to the expected long-run real rate of return of its sovereign wealth fund. In 2017, the government tightened its fiscal policy by reducing from 4 to 3 percent the estimated real rate of return on the SWF assets, which caps the annual transfer from the SWF to the budget. However, the transfer from the SWF could be higher during downturns for the purpose of countercyclical stabilization and expenditure smoothing. This model helps Norway produce the necessary savings to prepare for the rising costs of the pension system as the population ages. While this approach might be appropriate for countries in an advanced stage of development and with short resource horizon, it is less appropriate for those that need to invest in physical and human capital.

2. Chile. A structural balance rule was introduced in 2001 and revised in 2005, and a Fiscal Responsibility Law was enacted in 2006. Under the initial structural balance rule, government expenditures were budgeted in line with a structural balance target and structural revenues, i.e., revenues that would be achieved if: (i) the economy were operating at full potential; and (ii) the prices of copper and molybdenum were at their long-term levels. The implementation of the rule has changed over time—from 2001–07, a constant target for the structural balance (a surplus of 1 percent of GDP was defined to help eliminate debt and accumulate assets for the future); in 2008, the target was changed to 0.5 percent of GDP; and in 2009, the target was set at zero, and an escape clause was introduced to accommodate countercyclical measures—which helped Chile weather the global financial crisis. A fiscal council started operating in 2013. The council oversees two existing independent committees—on potential GDP and the long-run copper price—to set these key parameters in the computation of the structural balance. The reference (10-year ahead forecast) copper price and potential GDP are used in the structural budget calculation. Starting from 2015 budget, the government no longer adjusts revenues based on long-term prices of molybdenum.

3. Russia. Russia introduced a fiscal rule in 2008. Its first fiscal rule, which targeted a long-term non-oil deficit of 4.7 percent of GDP to be achieved by 2011, was suspended in 2009 to allow for a fiscal package to stimulate the economy during the global financial crisis. The rule was abolished in 2012 and replaced with a redesigned fiscal rule beginning in 2013. The new rule sets a ceiling on expenditures equivalent to the sum of oil revenue (measured at the benchmark oil price), plus non-oil revenues, plus a net borrowing limit of 1 percent of GDP. Benchmark oil revenues are calculated according to a 10-year backward looking oil price rule (a 5-year average was used in 2013, to be gradually increased to 10-years by 2018). Oil revenues above the “benchmark” oil price need to be saved in the Reserve Fund until it reaches 7 percent of GDP (though there are some allowable exceptions to the rule under the law). Once the Reserve Fund reaches this threshold, at least half of excess oil revenues should go to the National Wealth Fund, while the remaining resources would be channeled to the budget to finance infrastructure and other priority projects. When oil prices are below the benchmark, the Reserve Fund could be tapped to maintain expenditures. In case of a prolonged decline in oil prices, the benchmark oil price formula is reset to equal the three-year backward average. However, after the 2014 oil shock, the rule did not allow a fast-enough adjustment of the benchmark oil price, which led to it suspension in 2015 (as its continued implementation would have led to unwarrantedly large non-oil fiscal deficits as the three-year moving average resulted in a benchmark oil price per barrel of about $85 versus an actual oil price per barrel of about $42 in 2016). In 2018, the authorities started the implementation of a modified fiscal rule, based on a legislation passed in 2017, and initially targeted for implementation in 2019. The new rule targets a non-oil primary deficit of 1 percent of GDP in 2018 (and zero for 2019 and beyond)—at a fixed benchmark oil price per barrel of $40 (in real 2017-dollar terms) with a proposed annual adjustment by the US CPI inflation.

4. Mexico. A fiscal responsibility law (FRL), introduced in 2006, established a fiscal zero-balance target on a cash basis, with an escape clause to be triggered during downturns. The rule applies to the federal public sector (central government, social security, and key public enterprise, including the oil company, PEMEX, and electricity company CFE). It includes a reference oil price (set by a formula) and a system of four stabilization funds, including an oil stabilization fund. The rule was revised in 2008 and then 2009 to exclude PEMEX investment and change the target from zero-balance to a deficit of 2 percent of GDP, to boost investment in oil projects, and include all PEMEX’s investments in the budget. The escape clause, which establishes that if non-oil revenues are below their potential due to a negative output gap, there can be a deficit equivalent to the shortfall, was used in 2010, 2011 and 2012. The amendment to the FRL in 2013 provides for a cap on structural current spending (SCS) defined as current primary expenditure including transfers to state and local governments for capital, but excluding those outlays governed by automatic rules (pensions, subsidies for electricity and sub-national revenue-sharing). In 2014 the FRL was amended to include a target for the broader public sector borrowing requirement (PSBR) and a cap on the real rate of growth of SCS (set initially at 2 percent) to equal potential output growth staring from 2017.

5. Mongolia. Mongolia introduced a fiscal stability law (FSL) in 2010, with implementation starting in 2013. The fiscal stability law combines three rules: (i) Expenditure rule, where expenditure growth cannot exceed non-mineral GDP growth; (ii) Budget balance rule, where the structural fiscal deficit cannot exceed 2 percent of GDP, and the structural balance is defined as the difference between structural revenues and overall expenditures (structural revenues are defined as revenues that would be received if the prices of major minerals were at benchmark price, defined as a twenty four-year—20 previous years, the current year, and three future years—moving average of mineral prices, and price forecasts are based on the IMF and internationally reputable financial institutions; and (iii) a debt ceiling, where government debt in NPV terms cannot exceed 60 percent of GDP. The FSL was amended 11 times during 2011–17, and a new Debt Law was enacted: (i) the structural deficit was temporarily raised to 9.5 percent of GDP in 2018 and set to decline gradually to 2 percent of GDP in 2023 and beyond; (ii) Development Bank of Mongolia spending was brought onto the budget and included in the structural fiscal deficit; and (iii) debt limits are temporarily raised to 85 percent of GDP in 2017 and targeted to gradually decline to 60 percent of GDP in 2021 and beyond, while the definition of debt is narrowed from public to (general) government. This framework is supported by a stabilization fund: when mineral revenues exceed structural mineral revenues, the difference is placed in the stabilization fund, and when they fall short, the fund can be used to finance the deficit.

6. Timor-Leste. Timor-Leste set a floor on the non-oil deficit in line with an estimated sustainable income based on PIH, but subsequently deviated from it to scale up public investment. The PIH ties the fiscal deficit to financial wealth plus the NPV of oil revenues. Current wealth and the net present value of future oil revenues are used to finance either a constant flow of expenditure in real or in real per capita terms. The path of the non-oil primary fiscal deficit consistent with the PIH model is then calculated.

Annex II. Assumptions for Computing the Long-Term Fiscal Anchors


(Percent, unless otherwise indicated)

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Source: IMF staff.


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Prepared by a team led by Nabil Ben Ltaifa (MCD), and comprising, Kusay Alkhunaizi (Ministry of Economy and Planning), Olivier Basdevant (FAD), and Alberto Soler (FAD), with input from Ahmad Alabadi (SAMA) and Abdulrahman Binaqeel (Ministry of Finance). Tucker Stone and Diana Kargbo-Sical (both MCD) provided research support and editorial assistance, respectively. The authors are grateful to participants at the seminars at SAMA and the IMF for their helpful comments.


Based on both intertemporal and cross-sectional comparisons, Alkhareif et al. (2017) confirmed that the dollar peg has served Saudi Arabia well.


Many RRCs set up SWFs to achieve objectives in terms of stabilization (Mexico), investment for future generations (Botswana, Iran, Norway), or both (Qatar, UAE and Russia). In Saudi Arabia, the Public Investment Fund (PIF) has started recently to act as a SWF.


These options are discussed in more detail in IMF (2015).


This assumes an oil price constant in real terms beyond the WEO forecast horizon and a rate of return on financial assets that is higher than non-oil real GDP growth (see Annex II for more details on assumptions). The PIH annuity could be defined as constant in real or in real per capita terms. The results between the annuity in constant terms in level or per capita terms are very close owing to the assumption the population being roughly constant over the long term. See IMF (2012) for a more detailed discussion of PIH options.


Empirical literature points at inconclusive evidence of oil prices being either mean reverting (i.e., exhibiting well-defined cyclical properties, see Lee, List and Strazicich, 2006) or random walks (thus limiting the relevance of smoothing shocks around a cycle, see Gronwald, 2012). Overall, a key stylized fact is the existence of temporary explosive dynamics (Gronwald, 2016), with long-lasting impacts.


Russia used a rather more complex expenditure rule in 2013 which set expenditure equal to the sum of oil revenue (measured at the benchmark oil price), plus non-oil revenues, plus a net borrowing limit of 1 percent of GDP (Annex 1).


IMF 2017—Country Report 17/317


This Annex draws heavily on IMF (2012, 2015) and the staff reports for the Article IV of the countries under consideration.

Saudi Arabia: Selected Issues
Author: International Monetary Fund. Middle East and Central Asia Dept.