SAUDI BUDGET CONTINUES TO BE TRANSPARENT

UNCLAS RIYADH 000096

SIPDIS
SENSITIVE

DEPT FOR NEA/ARP, EEB

E.O. 12958: N/A
TAGS: ECON EFIN PGOV SA
SUBJECT: SAUDI BUDGET CONTINUES TO BE TRANSPARENT

REF: A. SECSTATE 1923

B. RIYADH 76

C. 09 RIYADH 572


1. (SBU) Post appreciates the opportunity to provide input
into this year's review of budget transparency. The
government publishes both its income and its expenditures
each year, as well as information about the economy (e.g.,
inflation, growth, GDP, etc.). In addition, the central
bank, the national oil company (Aramco) and most SAG agencies
publish annual reports. Those of parastatal companies, like
Aramco, are audited. Saudi Arabia's high dependence on oil
revenues (more than 80 percent of budget revenue) can affect
the pace of revenues and expenditures, especially when prices
are volatile. Saudi officials issue corrections for previous
years' revenue and expenditures as part of their annual
public statements, in addition to periodic public updates.
Post does not believe Saudi Arabia merits inclusion on this
year's list.


2. (SBU) In response to the specific questions raised in ref
A:

-- Is the central government expected to receive funding
under the FY 2010 SFOAA?

Yes, Saudi Arabia is expected to receive $65,000 of IMET
funding and $300,000 of NADR funding in FY2010.

-- Is the host country's annual national budget publicly
available?

The SAG publicly releases an annual budget statement in late
December for the following fiscal year (which corresponds to
the calendar year). This statement includes a general
breakdown by sector, as well as a more detailed list of
allocations for government organizations, including
universities and independent government bodies (such as the
investment promotion authority, the Saudi Red Crescent, the
tourism commission, the port authority, etc.). The 2010
budget listed 46 of these more specific allocations. Many of
these organizations (e.g., the SFD) publish their own annual
reports with very detailed income and expenditure
information. These are readily available to the public. The
Saudi Arabian Monetary Agency (SAMA) also publishes an
extremely detailed breakdown of the Saudi budget, including
detailed sector information and consolidated balance sheets
for public funds. SAMA also publishes monthly updates of the
public balance sheet, including overseas assets.

-- Are incomes and expenditures included in the
publicly-available budget?

Both income and expenditures are included in the public
budget information. Supplemental public information, such as
the central bank's annual report, and Aramco's audited
report, are also readily available.

-- What is post's assessment of the xtnt to which the
publicly-available budget accurately reflects actual
government incomes and expenditures?

The SAG derives most of its income from the national oil
company, Aramco, which releases an audited annual report.
Aramco's reported production numbers track closely with
industry estimates of Saudi production. Differences between
the SAG's budgeted income and actual income are a function of
global oil prices and unanticipated production fluctuations
based on OPEC decisions and other external factors beyond SAG
control. The government is generally conservative when
generating its budget estimate in December of the previous
year, but publishes actual income figures at the end of the
year. Senior officers regularly comment publicly on the
status of unanticipated budget deficits or surpluses as the
end of the year approaches.

Expenditures are reported in three categories: sector
allocations such as "transportation and communication,"
specific line-item allocations for government agencies and
universities, and a broad "Other" category, which makes up
approximately 50 percent of the budget and is predominantly
defense, intelligence, and related security expenditures.
The central bank's annual report provides extensive, detailed
information on these sectors. Many of these agencies,
including the Saudi Fund for Development, the Saudi Red
Crescent, and Saudi Arabian Airlines, publish detailed annual
reports which include breakdowns of revenue and expenditures.

While the SAG typically overspends its annual budget by 15 to
30 percent, it reports what these expenditures were for at
the end of the year. For example, in December 2009, the SAG
reported that its cost overruns for 2009 were spent on
renovations to several mosques, including those in Mecca and
Medina, food and welfare subsidies, the transfer of temporary
employees to permanent status, increased student enrollment
in universities, and increased scholarships for study abroad.
Throughout the year, Saudi and regional press regularly
report on SAG contract awards, which are also available on
many ministry websites.

-- Have there been any events since the 2009 review that may
have affected fiscal transparency?

King Abdullah directed the General Auditing Bureau to
implement its second strategic plan to increase financial
auditing and performance monitoring, which is explicitly
linked to increasing public awareness and trust of the
activities of SAG entities. The Saudi cabinet also directed
all ministries and agencies that lacked them to set up
internal audit bureaus.

-- Since last year's review, what efforts has the host
government undertaken to improve fiscal transparency? What
progress has been made, pursuant to the 2009 demarches on the
subject?

The SAG has stepped up its efforts to combat waste, fraud,
and abuse. There has been extensive media reporting on
efforts of the General Auditing Bureau to hold SAG agencies
accountable for spending and performance. The GAB annual
report includes the results of audits of financial statements
and budgets, as well as reports of violations. The GAB
report pointed out cases of over-invoicing, project delays,
and malfeasance.
SMITH