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Zawya
20-05-2025
- Business
- Zawya
Saudi Arabia's rising debt and spending create fiscal pressure
Saudi Arabia's rising public debt and continued dependence on oil revenues are raising concerns among economists who urge the Kingdom to enforce tighter fiscal discipline to safeguard long-term sustainability. After accumulating more than $900 billion in overseas SWF assets, the largest Arab economy has stuck to borrowing to keep those assets intact so it will maintain its strong global credit rating while ensuring funds for mega projects, these experts believe. Over the past 10 years, the price of Saudi crude has averaged around $70 a barrel but the breakeven price needed to balance the Gulf Kingdom's budget has remained above $90 a barrel, which is almost impossible to achieve in the present situation. 'This year for example, the breakeven price is around $94.5, nearly $20 above the current price of Brent crude…this means that maintaining a fiscal balance requires oil prices at that high level or opting for strict fiscal discipline…there is a pressing need to purse structural reforms to lessen the risks of persistent budget deficits,' said Saeed Al-Shaikh, a former Shura (appointed parliament) member and ex-chief economist at the National Commercial Bank, now Saudi National Bank (SNB). Big challenge In an Arabic language article published in local newspapers this week, Al-Shaikh said the deficit poses a big challenge to Saudi Arabia's fiscal sustainability. He said the government has become heavily reliant on borrowing instead of withdrawal from its foreign assets to fund mega projects and other sectors. 'The government believes this will preserve its strong global rating…this underscores the need for increasing non-oil revenues and improving spending efficiency…although this strategy protects the Kingdom's foreign assets and investments, it will increase its debt servicing burden and this should prompt the government to continuously revise and manage the debt ceiling,' Al-Shaikh said. Saudi Arabia's public debt has nearly doubled over the past seven years to reach around 1.3 trillion Saudi riyals ($347 billion) at the end of March from SAR560 billion ($149 billion) at the end of 2018, the Finance Ministry said in a recent report. Debt surge The debt is forecast to surge in the next two years due to a projected budget deficit, boosting its ratio to GDP to one of its highest levels of around 33.5 percent at the end of 2026 from 17.6 percent at the end of 2018, the Saudi Jadwa advisory firm said last week, citing government data. Saudi Arabia is heavily dependent on oil revenues, which account for more than two thirds of its national income. Given its inability to stem current expenditures, including wages and military spending, which accounts for over 30 percent of the current expenditure, Riyadh has suffered from fiscal gaps in most years. The strong reliance on oil sales has played havoc with the country's fiscal system. When crude prices dived to as low as $42 a barrel in 2020, its budget deficit climbed to one of its highest levels of $78 billion. It turned into a surplus of about $27.7 billion in 2022, when oil prices rocketed above its breakeven price to nearly $104 a barrel. During the first quarter of 2025, the Kingdom's shortfall leaped fourfold due to lower oil export earnings. It stood at around SAR59 billion ($16 billion) in the quarter ended March 2025 against $3.3 billion a year before. Total revenues fell 10 percent to SAR264 billion ($70 billion) while spending swelled by around five percent to SAR322 billion ($86 billion), the Finance Ministry said. Strong rating 'Saudi Arabia possesses a strong credit rating given its massive assets and can move within a comfortable fiscal space that enables it to borrow from the international market at some of the most competitive rates,' said Ihsan Buhlaiga, a former Shura member. He said two thirds of Saudi Arabia's public debt is domestic and that is projected to rise as the Kingdom expects the deficit to stay until 2027. The debt has remained below 30 percent of GDP in the past years but it is expected to break that ceiling to reach 32.3 percent at the end of 2026 and around 33.3 percent at the end of 2027, Buhlaiga said. 'Saudi Arabia needs to continue its efforts to achieve fiscal sustainability by developing a stable income and increasing revenues from its investments…for now, I believe the Kingdom's public debt is still relatively low considering the fact that the average debt-to-GDP ratio in the OECD is nearly 120 percent,' he said. In March, S&P Global Ratings upgraded Saudi Arabia's rating to 'A+' from 'A' with a stable outlook, citing socioeconomic and capital market reforms. Strong non-oil growth and rising oil volumes from 2025 will support medium-term growth prospects, the agency said. Saudi Arabia's National Debt Management Centre welcomed the decision, saying it would allow Riyadh to issue global bonds and sukuk at a more favourable rate. (Reporting by Nadim Kawach; Editing by Anoop Menon) (
Business Recorder
19-05-2025
- Business
- Business Recorder
Govt required to step up efforts aimed at implementing SOE governance framework across all SOEs
ISLAMABAD: Efforts will redouble to fully implement our State-Owned Enterprise (SOE) governance framework across all SOEs, enhance the Sovereign Wealth Fund's (SWF) governance through key legislative amendments, advancing other governance and anti-corruption reforms, gradually relaxing trade barriers, and adopting policies to build climate resilience. This was pledged in the Letter of Intent dated 24 April 2025 signed off by the two economic team leaders - Minister for Finance and Governor State Bank of Pakistan (SBP). The first International Monetary Fund (IMF) staff level report on the ongoing Extended Fund facility program uploaded on its website on Saturday highlighted the significant fiscal and debt sustainability risks posed by contingent liabilities related to SOEs. As of end-December 2024, these liabilities not included within the fiscal perimeter consist of: guarantees related to SOE commodity operations amounting to Rs 4,211 billion; non-guaranteed circular debt in the power and gas sectors at PRs 1,701 billion and PRs 2,842 billion respectively; non-guaranteed SOE debt totalling Rs 141 billion in external and PRs 939 billion in domestic liabilities; and other estimated contingent liabilities of PRs 500 billion. Altogether, these exposures are estimated to equal 9.3 percent of GDP. The IMF noted that the ceiling on the amount of government guarantees applies to the stock of publicly guaranteed debt for which guarantees have been issued by the central government. This includes both domestic government guarantees, such as those provided to SOEs for commodity operations, and external government guarantees. External government guarantees will be converted into Pakistani rupees at the program exchange rate. The IMF further clarified that if any entity incurs interest arrears on borrowings backed by a guarantee, the guarantee will be evaluated as the higher of the value of the guarantee issued or the total amount owed for the purposes of the Quantitative Performance Criteria (QPC). However, this ceiling does not include guarantees issued by the Ministry of Finance for the State Bank of Pakistan's borrowing from the IMF. The Fund urged amendments to the SWF that must include (i) clarifying the SWF's mandate and strengthening its governance arrangements and anti-corruption reforms; (ii) requiring transparent and competitive procedures for divestment and procurement; (iii) ensuring that appropriate fiscal safeguards are in place, and (iv) subjecting SWF-SOEs to the SOE Act (end-March 2026 proposed reset SB). The IMF also urged that SWF's governance processes should ensure transparency, merit-based appointments to its board and advisory committee, and alignment with international best practices. Additionally, the IMF noted that the SWF should operate under fiscal safeguards to prevent financial risks, such as prohibiting the SWF from incurring debt, providing guarantees, or participating in public-private partnerships. Revenues from SWF operations should be directed to the government, and any investments made by the SWF must comply with strict financial risk-return criteria. The execution of these reforms will only proceed once the necessary amendments to the SWF Act are completed, as agreed with the IMF. The target date for publication of the Governance Diagnostic Assessment (in spite of IMF technical assistance) was missed, the report noted, due to the identification of a focal point and the new target date is end July 2025 to end August. The report further noted that the government must amend the laws of nine remaining statutory SOEs to bring them in line with the SOE Act (end June 2025) and fully ensuring compliance with the SOE Act (end-June 2025). The IMF emphasized that it is critical for the new SOE Act and Policy to be fully implemented in order to limit financial losses, improve public services, protect public assets, reduce the state's role in commercial activities, and enhance overall accountability; and acknowledged that some progress has been made, with support from development partners, in establishing business plans and statements of corporate intent, as well as in the publication and auditing of financial statements and annual reports for all SOEs. Progress has also been noted in identifying and contracting public service obligations between SOEs and the government. However, the IMF emphasized that these efforts need to be accelerated. It recommended the revision of existing operational manuals and the issuance of supplementary guidance notes, in line with recommendations provided by development partners. The IMF also pointed out that greater progress is needed in establishing majority-independent boards, noting that currently only about half of commercial SOEs meet this standard. The IMF stressed the importance of the Central Monitoring Unit (CMU) continuing to refine its electronic database to ensure full compliance with all reporting requirements under the SOE Act. It also underscored the need for the CMU's reporting to align with the Organization for Economic Co-operation and Development (OECD) best practices to strengthen transparency and accountability across the SOE sector. The IMF emphasized that advancing structural reforms is critical to generating sustainable and inclusive growth. It noted that the full implementation of the SOE governance framework, and the inclusion of all SOEs within its scope, is essential for improving their performance and reducing associated fiscal risks; and governance frameworks should continue to be strengthened to enhance transparency and accountability and to mitigate risks of undue influence and corruption in policymaking and implementation. Following through on the SOE reform agenda is critical for scaling back the state's footprint in commercial activities and improving public services, the IMF noted adding that the authorities remain committed to addressing the remaining gaps in the governance framework established in 2023 and implementing it to enhance the viability of SOEs, reduce fiscal liabilities, and decrease the state's role in commercial enterprises. This reform agenda aims to improve services for the public, and it includes ensuring that all SOEs are covered under the SOE governance framework, with plans to amend laws for nine remaining statutory SOEs to align them fully with the provisions of the SOE Act by June 2025. The IMF further noted that the governing laws of four major statutory bodies have already been aligned with the SOE framework, with the alignment of nine additional statutory SOEs targeted by June 2025. Furthermore, in line with the directives from CCoSOEs, detailed restructuring, transformation, and merger plans for selected SOEs are actively under consideration and development. The IMF highlighted the development of a centralized digital database for SOEs, which is being created by the CMU in collaboration with the National Information Technology Board. This digital database is designed to enhance monitoring, performance evaluation, and data-driven decision-making in the SOE sector. Copyright Business Recorder, 2025
The Herald Scotland
10-05-2025
- Climate
- The Herald Scotland
'Extreme risk of wildfire' warning extended across Scotland
A 'very high danger' assessment – released in conjunction with the Scottish Wildfire Forum (SWF) - covering the whole of Scotland was put in place from Wednesday until Friday. An extreme danger assessment covering the north of Scotland was issued for Friday, and has since been extended to cover mainland Scotland until Monday. READ MORE: Half of Scotland's river catchments now at alert for water scarcity Wildfire warning after disposable barbeque blamed for massive blaze Wildfires have the potential to burn for days and devastate vast areas of land and wildlife; and threaten the welfare of nearby communities. SFRS Wildfire Lead Michael Humphreys said: "We are asking the public to exercise extreme caution and think twice before using anything involving a naked flame. "Many rural and remote communities are hugely impacted by wildfires, which can cause significant damage. "Livestock, farmland, wildlife, protected woodland and sites of special scientific interest can all be devastated by these fires - as can the lives of people living and working in rural communities. "These fires can also have a hugely negative impact on the environment and the release of greenhouse gas emissions into the atmosphere. "Human behaviour can significantly lower the chance of a wildfire starting, so it is crucial that people act safely and responsibly in rural environments and always follow the Scottish Outdoor Access Code."
The Age
29-04-2025
- Entertainment
- The Age
‘Sorrento is not your town': Writers festival fallout deepens
This was a further contrast with the SWF, which had Lionel Lauch of Indigenous organisation Living Culture perform a Welcome to Country on behalf of the Bunurong community, while moderators gave an Acknowledgement of Country at the start of other sessions. The festival has several First Nations writers and publishers who are part of its program. But during an impromptu speech at the garden literary gabfest, local Liberal MP Zoe McKenzie, a supporter of SWF, made a light-hearted joke comparing Advance Australia Fair to a Welcome to Country. This further upset some in Sorrento. Now, it emerges there is yet more beef. Turns out Baillieu couldn't attend several SWF events because either the time or venue had changed since his tickets were issued. SWF said it had updated ticket holders via email. Baillieu said that was news to him, and he was seeking either an apology or explanation from Perkin, plus $60 for his unusable tickets. Changing allegiances Congratulations to Paul Guerra, the new chief executive of the Melbourne Football Club, replacing Gary Pert. Guerra, one of the few people in Melbourne to attend more events than CBD, has been chief executive of the Victorian Chamber of Commerce and Industry for five years. He's also a director at Racing Victoria and previously was the boss at the Royal Agricultural Society of Victoria, which runs the Melbourne Royal Show. The Age quoted competition sources saying the exec was a strong strategic thinker with good people skills, and the Demons believed it could 'bring him up to speed on football'. It will also have to bring him up to speed on being a Dees supporter, given Guerra is a lifelong Bombers tragic. We guess his re-education started yesterday. 'I'm moving from the business with politics to the business with sport, and with that, I'm trading the black and red of the Bombers to the red and blue of the Demons,' he told CBD. And as for the soon-to-be vacant VECCI post, CBD is sure that chief of staff Chanelle Pearson would love the job. Other contenders might include failed Melbourne lord mayoral candidate Arron Wood, or Victorian executive director of the Property Council of Australia, Cath Evans. No doubt it will be the hot topic at the chamber's inaugural Melbourne Winter Ball, to be held in Southbank on May 29. Bennelong matters For the Liberals to have a hope on Saturday, they need to reclaim John Howard 's old stomping ground now held by Labor on a wafer-thin margin, the Sydney seat of Bennelong. The party's candidate, Scott Yung, has spent much of the campaign firmly in the 'embattled' camp due to reports outlining his ties to a Chinese Communist Party-linked casino high roller. He also copped heat for handing out Easter eggs to primary school students, an election sweetener gone awry. Yung was evasive when confronted with media questions, even fleeing his own campaign launch, but he found a softer landing on the podcast of his former boss, Mark Bouris, founder of mortgage-lender Yellow Brick Road. 'I just want to clarify for the sake of this conversation: you're not a communist are you?' Bouris asked. Loading 'I think it's borderline racism. Just because I've got an Asian face, my parents have come from China and Hong Kong, they call me a communist,' Yung responded. The fine-print on the podcast disclosed that it was authorised by Yung's campaign – often a tell-tale sign of a paid post. Nothing fishy, we hear. Due to an Australian Electoral Commission crackdown on influencer content, the authorisation was added to avoid any further damaging headlines. Winning ways The scion of one of Australia's grandest, faded media dynasties has got the green light for a renovation at his $22 million mansion to build a new, er, wall. Charles Fairfax, son of the late Lady (Mary) Fairfax, AC, OBE, and heir to the family that once published this masthead, lodged a development application with local Sydney Woollahra Council last year, but it was rejected. The resort-style property, which Charles and wife Kate picked up in 2022, is just 10 minutes down the road from his fabled childhood home, Fairwater, in Double Bay, now owned by billionaire tech baron Mike Cannon-Brookes. Fairfax appealed against the council's rejection to the Land and Environment Court. After a conciliation conference, a revised plan kept everyone happy … and out of court.
The Star
25-04-2025
- Business
- The Star
Indonesian sovereign wealth fund entry into capital market raises long-term risks
JAKARTA: Danantara's planned entry into the domestic capital market is expected to significantly help stabilise the local stocks and bonds market, especially at times of volatility, but some have also warned that the move could disrupt the sovereign wealth fund's (SWF) focus on its much needed long-term projects for the economy. The move comes after the country's stock market and currency emerged as one of Asia's worst-performing this year amid uncertainties due to the United States' wide-sweeping tariffs and concerns over the country's fiscal policy. The IDX composite, the country's benchmark, fell to its lowest level of the year at 5,968 points on April 9, the second trading day after the announcement, marking a 15.9 per cent drop from its position at the start of 2025. Meanwhile, the rupiah momentarily hit around Rp 17,000 per US dollar on April 7, as it extended depreciation against the greenback since the beginning of the year. Danantara's chief investment officer Pandu Sjahrir said on April 14 that the fund was ready to act as a 'liquidity provider' for the domestic capital market. He noted that dividends from state-owned enterprises (SOEs), a key source of the fund's capital, are expected to start flowing later this April. He vowed to be careful in the placement of funds, saying 'what's important is the return', while ensuring the fund would start weighing investment in real strategic projects. Fikri C. Permana, an economist at local brokerage KB Valbury Sekuritas, said Danantara's intervention could serve as a positive sentiment for the IDX. He likened the fund's potential role to that of the Workers Social Security Agency (BPJS Ketenagakerjaan), which had limited activity in the stock market due to underwhelming returns from its existing investments. He also said Danantara should consider extending its role as a long-term institutional investor in the market, citing attractive return prospects in the future. 'Government-backed institutions in other countries have taken similar steps, even Japan's central bank invests in equities,' he told The Jakarta Post on Tuesday (April 22). On April 7, China intervened to support domestic stocks plunging on US tariff woes, with a sovereign wealth fund increasing its holdings in equities and saying it would defend market stability, Reuters reported. To manage risk, he recommended that Danantara diversify beyond its current holdings in SOEs' shares and consider investing in privately owned, publicly listed companies. 'They could look into sectors aligned with government programs, such as the free nutritious meal program, where profits from these firms would eventually flow back to Danantara in the form of dividends,' he added. Felix Darmawan, an economist at Panin Sekuritas, agreed that Danantara's active presence in the capital market could help stabilise share prices of publicly listed SOEs amid a bearish trend fueled by sustained foreign capital outflows. He noted that the fund's support should not be limited to banking stocks, which have an outsized influence on the IDX Composite, but should also extend to commodities such as gold and coal, as well as the construction sector. '[Still,] if Danantara wants to maintain investor confidence, especially from foreign investors, it must also push for greater transparency, stronger governance and better management within SOEs, not just intervene in the market,' Felix told Kontan on Tuesday. Both the IDX and the Financial Services Authority have welcomed Danantara's entry into the market, calling it a timely move to reinforce investor confidence and market resilience. Following the announcement of Danantara's plan, the IDX Composite continued its upward momentum, climbing 6.6 per cent to close at 6,634.4 on Wednesday, despite no official confirmation that the fund had already begun intervening in the market. Frederic Neumann, chief Asia economist at HSBC, acknowledged that short-term market interventions by government agencies can provide temporary relief for equity markets. However, he expressed skepticism about their long-term effectiveness. 'As an economist, I'd say that no matter the resources at your disposal, channeling them into strengthening growth fundamentals tends to yield better long-term outcomes,' Neumann told the Post on Tuesday. 'Indonesia has tremendous growth potential, and as long as the fundamentals are sound, the market should be able to correct itself.' In response to external pressures, such as US' blanket tariffs, Neumann urged the government to use its fiscal resources on investments that support sustainable economic growth as well as introducing deregulation and pro-business policies. Rully Wisnubroto, senior economist at Mirae Asset Sekuritas Indonesia, acknowledged that market intervention could be 'understandable' in the short term to stabilise prices and ease investor anxiety. However, he cautioned that such measures should not become a long-term strategy. He also flagged potential risks for Danantara to enter the market during a period of heightened volatility. "Frankly, I don't agree with using SOE dividends [collected by Danantara] to support market liquidity," Rully said during a press conference on April 17. "Those funds were meant to drive economic growth [through productive investments], as originally promised." - The Jakarta Post/ANN
