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Keywords:

  • budget;
  • budget systems;
  • fiscal policy;
  • growth;
  • Saudi Arabia

SUMMARY

This article describes and evaluates the budgetary institutions in Saudi Arabia. The primary sources of information for this study are publications from the Saudi Ministry of Finance and a survey implemented to investigate the different aspects of budget formulation and execution. We find that the Saudi budget experiences difficulties associated with incremental annual line-item budgeting systems. Although capital expenditures in the education and health sectors are guided by five-year plans developed by the Ministry of Planning, the rest of the budget preparation procedure is mainly driven by requests from government agencies to increase spending (i.e. a bottom-up approach), instead of being based on an early determination of the macroeconomic constraints and the acceptable level of deficit (i.e. a top-down approach). The result is an exacerbation of tragedy of the commons problems associated with information asymmetry and conflict-avoidance strategies. We discuss possible reasons for this finding and offer budgetary reform proposals. Copyright © 2014 John Wiley & Sons, Ltd.