Higher public spending will push Saudi Arabia’s budget deficit to 7% of gross domestic product this year، the International Monetary Fund said on Wednesday، according to Reuters.
Its forecast is well above the government’s forecast.
The IMF’s projection is based on an assumption that Saudi oil output will average 10.2 million barrels a day and oil prices will average $65.5 a barrel in 2019، it said in a statement after a staff visit to the kingdom.
The Saudi government has forecast a budget deficit of 4.2% of GDP this year، compared to 4.6% in 2018.
The IMF said the introduction of a value-added tax has been very successful، but the Saudi government should consider raising the rate from 5%، which is low by global standards، in consultation with other Gulf governments.
A reduction in the government wage bill، a more measured increase in capital spending، and the better targeting of social benefits will all yield fiscal savings، it said.
Last month Jihad Azour، director of the IMF’s Middle East and Central Asia Department، had told Reuters the budget deficit this year could be 7.9 percent، but also said that estimate was likely to be revised after the IMF delegation’s visit.