Budgetary institutions and the political economy of fiscal policy in resource-rich countries: The case of Saudi Arabia

Abstract

This study investigates budgetary institutions and the political economy aspects of fiscal policy in Saudi Arabia during the period 1969 to 2015. The historical overview of government expenditure shows that capital expenditure is always more sensitive to oil price fluctuations compared to current expenditure. Besides, the budget institutions index applied in this study shows that the limited power of the Saudi Consultative Assembly (the parliament) is mainly responsible for the low budget index score compared to the MENA region. The political economy aspects of fiscal policy in Saudi Arabia show that the Saudi Government succeeded in managing its fiscal policy as a benevolent autocrat. However, as the government is planning to raise revenue from non-oil sources (such as the VAT) in the near future, it is important to have a stronger and independent parliament that represents people and has an increased authority in reviewing and approving budget items. 2017 Inderscience Enterprises Ltd.