Mohammed bin Salman announces big spending

Faisal Al Nasser | Reuters

A man holds a nozzle at a petrol station in Riyadh, Saudi Arabia October 8, 2017.

According to analysts, a key feature of the budget was the explicit focus on structural reforms accompanying the increased spending.

“The key is to look at what they’re spending the money on and how effectively they spend it,” Khatija Haque, head of Middle East and North Africa research at U.A.E-based bank Emirates NBD, told CNBC on Wednesday.

The government intends to cut energy subsidies next year, with the move widely expected to free up funds for other parts of the economy such as infrastructure.

“It’s really now about the effectiveness of spending rather than just throwing money at the problem and having it disappear into private hands without actually delivering what was promised — that’s a process that needs to change,” Haque said.

The introduction of a value added tax next year in addition to new excise taxes on tobacco and soft drinks, as well as recent levies on expatriates are widely expected to strengthen non-oil revenues next year. Riyadh forecasts non-oil income at 291 billion riyals in 2018, up from 256 billion riyals this year.