The Ministry of Finance (MoF) issued the Quarterly Budget Performance Report for Q2 22. The main highlight of the report is the fiscal surplus of SAR77.9bn in Q2 22, which increased the YTD surplus to SAR135.4bn. This is higher than 2022 budget target of SAR90.1bn. Q2 22 surplus compares favourably with a surplus of SAR57.5bn in Q1 22 and a deficit of SAR4.6bn in Q2 21. Revenues grew by 49.3% yoy to SAR370bn in Q2 22, while expenditures increased by 15.7% yoy to SAR292bn. The increase in revenues was primarily driven by a strong growth in oil revenues, which increased by 89.5% yoy to SAR250bn. Non-oil revenue grew by 3.5% yoy to SAR120bn. For expenditures, current expenditure was up 15.7% yoy to SAR292bn, while Capex grew by 64.3% yoy to SAR36.0bn.
Total revenues recorded a strong growth of 49.3% yoy to reach SAR370bn in Q2 22, the highest quarterly revenue since MoF started to publish the budget’s quarterly data in Q1 19. The remarkable growth is mainly driven by a strong increase in oil revenues.
Oil revenue increased significantly by 89.5% yoy (+36.3% qoq) to SAR250bn. We believe the growth is attributed to a combination of higher oil production and prices. Following the recovery in global oil market, we believe Saudi Aramco hydrocarbon production was c13.0 mmboed in Q2 22 vs c11.5 mmboed in Q2 21. Brent oil prices average was cUS$112/bbl in Q2 22 vs US$69.1/bbl in Q2 21 (US$97.9 in Q1 22).
Total expenditures increased by 15.7% yoy (+32.7% qoq) to SAR292bn in Q2 22, driven by 11.1% yoy (+24.7% qoq) increase in current expenditure (Opex) to SAR256bn. Capital expenditure (Capex) also increased significantly by 64.3% yoy (+143% qoq) to SAR36.0bn. However, it stood at 14% of total revenue in Q2 22 vs 8% in Q1 22 and 17% in Q2 21. We believe the government continued its prudent approach towards expenditures and is looking to direct the surplus to increase reserves, support development funds or repay outstanding debt, as outlined in the Fiscal Sustainability Program of Vision 2030.
The main highlight of Q2 22 budget is the surplus of SAR77.9bn, which increased the ytd surplus to SAR135.4bn, higher than the initial budget target of SAR90.1bn. This compares to a deficit of SAR4.6bn in Q2 21 and a surplus of SAR57.5bn in Q1 22.
Public debt reached SAR967bn (26.7% of the projected GDP for 2022f) by the end of Q2 22, of which domestic debt accounted for SAR605bn (62.6%) while external debt accounted for SAR362bn (37.4%). The budget surplus will be directed to increase reserves, support development funds (NDF and PIF) to potentially accelerate the implementation of strategic programs and/or to partially repay outstanding debt.