BUSINESS & ECONOMY

Saudi Budget Reveals Realism now Guides the Way

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1 year ago

December 24, 2023

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By Andrew Cunningham

Saudi Arabia’s Ministry of Finance is predicting that the kingdom will continue to record budget deficits in the years ahead as a result of increased spending on giga-projects and infrastructure development.

The Saudi ministry’s budget statement for 2024, published earlier this month, takes a more realistic approach than in previous years. Gone are the ambitions to balance the budget through implausibly rapid increases in non-oil income. Instead, we see a recognition that moderate deficits will be necessary if the kingdom is to fulfill its ambitions to transform both its economy and social structure.

The 2024 budget statement estimates that the deficit for 2023 will be $22 billion, rather than the surplus of $4 billion that was being predicted this time last year. The difference lies in expenditure that was 17 percent ahead of budget, far exceeding the increase in revenues, which was also ahead of budget, but by a smaller amount. Looking ahead, the ministry is predicting annual deficits of between $20 billion and $30 billion over the next three years. Shortfalls at that level represent about 2 percent of Saudi GDP and are well within the kingdom’s debt-financing capacity.

Saudi Arabia’s debt-to-GDP ratio is around 25 percent, and its international credit ratings, all at the higher end of the single-A range, are on an upward trend. The government’s reserves at the Saudi Central Bank are nearly $400 billion. This picture is very different from the one presented a few years ago, when the government was posting annual deficits of between $50 billion and $100 billion, amounts that were clearly not sustainable over the medium term.

Furthermore, the current, more modest deficits are being achieved despite the huge expenditure on mega-projects and public infrastructure, such as parks and leisure facilities, which has been steadily rising in recent years.

Remaining realistic

Today’s fiscal projections, more realistic, more modest, and more sustainable than in years past, do, of course, come with important caveats. Most importantly, the kingdom is still an oil-based economy, and the price of oil remains fundamental to the government’s financial health.

The Ministry of Finance does not disclose the price of oil on which its revenue forecasts are based, but a review of budget outcomes over the past 15 years shows that, in practice, the government only posts a surplus when the price of oil is around $95 per barrel or higher.

The price is currently around $75 per barrel and the outlook for 2024 is uncertain. Oil markets were unimpressed by the announcement by Opec and its partners on November 30 that members would make further cuts to production from January 1, going beyond the cuts that were announced in June. Prices during December have slipped, rather than risen. Non-oil revenues in the budget have increased at a compound average growth rate of 14 percent over the past 10 years and now account for 30 to 40% of total government revenues.

This is a remarkable achievement that reflects the gradual imposition of taxes, and in particular the 15 percent value added tax. Yet it is the price of oil, and the accompanying level of oil exports, that will determine the size of deficits and surpluses for years to come.

The second important caveat relates to the integrity of the budget itself. Although the budget statement states clearly that giga-projects and infrastructural development are the key drivers of increased expenditure, it is also evident that much of the investment in these projects is not financed from the government coffers.

The Public Investment Fund will inject an average of $40 billion into the local economy next year and the year after, the budget statement says, and the National Development Fund will inject a total of $152 billion between now and the end of the decade.

So, the figures we see in the Saudi budget present only a partial picture of government financial activity, and it is reasonable to assume that the resources of state-owned bodies such as the PIF add considerably to the government’s financial flexibility.

Of course, the PIF does not only spend: it receives income from its various investments, both at home and abroad. But that, in turn, bring us to the third and final major caveat arising from the budget statement: when will spending on giga-projects and infrastructure start to decline, and be replaced by revenues?

The Saudi government is rushing headlong to diversify its economy and transform its society. Hardly a week goes by without the announcement of an ambitious new initiative, trailed as being world-leading. At what point will the building stop, and revenue collection, in the form of business taxes and VAT on expenditure, begin?

We should welcome the increasing realism of the Saudi Ministry of Finance’s budget statements, but recognise that they only present a part of the kingdom’s financial position.

Andrew Cunningham writes and consults on risk and governance in Middle East and sharia-compliant banking systems

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BUSINESS & ECONOMY

What is the Role of Bosnia in Strengthening Halal Supply Chains in Europe?

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5 days ago

March 20, 2025

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Hafiz M. Ahmed

Imagine walking into a supermarket in Paris, Berlin, or London, scanning the shelves for halal-certified products. You pick up a pack of chicken, a bottle of olive oil, and a box of cookies, all bearing the halal logo. But have you ever wondered how these products made it to the shelf? Behind every halal-certified item lies a complex supply chain that ensures its authenticity, safety, and compliance with Islamic principles. In Europe, where the demand for halal products is growing rapidly, building a reliable and transparent halal supply chain is no small feat. Enter Bosnia and Herzegovina, a country that has emerged as a key player in strengthening halal supply chains across the continent.

With its deep-rooted Islamic heritage, cutting-edge certification processes, and collaborative approach, Bosnia is setting a new standard for halal integrity in Europe. This article explores Bosnia’s pivotal role in creating a robust halal supply chain, its collaborations with other halal-certified organizations, and why its efforts matter for businesses and consumers alike.

The Growing Demand for Halal Products in Europe

Europe is home to over 25 million Muslims, a number that is expected to grow in the coming years. This demographic shift has fueled a surge in demand for halal products, from food and beverages to cosmetics and pharmaceuticals. According to a report by Statista, the European halal food market alone is projected to reach $30 billion by 2025. However, meeting this demand is not without its challenges.

One of the biggest hurdles is ensuring the integrity of the halal supply chain. From farm to fork, every step of the process must adhere to strict halal standards. This includes sourcing halal-certified raw materials, using compliant processing methods, and maintaining transparency throughout the supply chain. For businesses, this requires a high level of coordination and expertise—something that Bosnia has mastered.

Bosnia’s Expertise in Halal Certification: A Foundation for Trust

Bosnia and Herzegovina has long been a leader in the global halal industry, thanks in large part to its Agency for Halal Quality Certification (AHQC). Established in 2007, the AHQC is renowned for its rigorous standards and transparent processes. But Bosnia’s contribution to the halal industry goes beyond certification; it plays a critical role in strengthening halal supply chains across Europe.

Here’s how Bosnia is making a difference:

Setting Rigorous Standards: The AHQC’s certification process is one of the most stringent in the world. It covers every stage of production, from sourcing raw materials to packaging and distribution. This ensures that products bearing the Bosnia Halal Certification logo meet the highest standards of quality and compliance.
Promoting Transparency: Transparency is at the heart of Bosnia’s approach to halal certification. The AHQC requires detailed documentation and conducts regular audits to ensure ongoing compliance. This level of transparency builds trust among consumers and businesses alike.
Leveraging Technology: Bosnia is at the forefront of using technology to enhance halal supply chains. From blockchain to track and trace systems, the country is leveraging innovative solutions to ensure the integrity of halal products.

Collaborations: The Key to a Stronger Halal Supply Chain

Bosnia’s success in strengthening halal supply chains is not a solo effort. It is the result of strategic collaborations with other halal-certified organizations, businesses, and government bodies across Europe. These partnerships have been instrumental in creating a more reliable and transparent halal ecosystem.

Partnerships with Halal-Certified Businesses: Bosnia works closely with businesses that are committed to halal integrity. By providing them with certification and guidance, the AHQC helps these companies navigate the complexities of the halal supply chain.
Collaborations with International Halal Organizations: Bosnia is an active member of global halal organizations such as the AHAC – Association of halal Crttifiers. These collaborations ensure that Bosnia’s standards align with international best practices.
Government Support: The Bosnian government has been a strong advocate for the halal industry, providing funding and support for initiatives that promote halal integrity. This has enabled the AHQC to expand its reach and impact.
Educational Initiatives: Bosnia is also investing in education and training to raise awareness about halal standards. Through workshops, seminars, and publications, the AHQC is helping to build a more informed and skilled workforce.

Bosnia’s Impact on the European Halal Market

To understand the real-world impact of Bosnia’s efforts, let’s look at a case study. In 2020, a major European supermarket chain partnered with the AHQC to source halal-certified poultry products. The collaboration involved:

Sourcing: The AHQC worked with farmers and suppliers to ensure that the poultry was raised and processed in accordance with halal standards.
Certification: The AHQC certified the entire supply chain, from the farm to the supermarket shelf.
Transparency: The supermarket chain used blockchain technology to provide consumers with real-time information about the product’s journey.

The result? A 20% increase in sales of halal-certified poultry products within six months. This success story highlights the tangible benefits of Bosnia’s approach to halal supply chain management.

Why Bosnia’s Role Matters for Europe

Bosnia’s contributions to the halal industry have far-reaching implications for Europe. Here’s why:

Consumer Confidence: By ensuring the integrity of halal supply chains, Bosnia is helping to build consumer confidence in halal-certified products. This is crucial in a market where trust is paramount.
Economic Growth: The halal industry is a significant driver of economic growth. By strengthening halal supply chains, Bosnia is creating new opportunities for businesses and boosting the European economy.
Cultural Integration: The halal industry plays a vital role in promoting cultural integration. By providing high-quality halal products, Bosnia is helping to meet the needs of Europe’s diverse population.
Global Leadership: Bosnia’s expertise in halal certification and supply chain management positions it as a global leader in the industry. This not only enhances its reputation but also sets a benchmark for other countries to follow.

Challenges and the Way Forward

While Bosnia has made significant strides in strengthening halal supply chains, challenges remain. These include:

Standardization: Despite Bosnia’s efforts, there is still a lack of uniformity in halal standards across Europe. This can create confusion for businesses and consumers.
Fraud and Mislabeling: The rise of counterfeit halal products is a growing concern. Bosnia is addressing this issue through stricter regulations and advanced tracking technologies.
Awareness: Many consumers and businesses are still unaware of the importance of halal certification. Bosnia is tackling this through educational initiatives and outreach programs.

Looking ahead, Bosnia’s focus will be on fostering greater collaboration, leveraging technology, and raising awareness about halal standards. By doing so, it aims to create a more robust and transparent halal supply chain that benefits everyone.

Bosnia and Herzegovina has emerged as a beacon of reliability and transparency in the European halal industry. Through its rigorous standards, innovative solutions, and collaborative approach, the country is playing a pivotal role in strengthening halal supply chains across the continent. For businesses, this means access to a growing market and a trusted partner in halal certification. For consumers, it means peace of mind knowing that the products they purchase meet the highest standards of quality and authenticity.

As the demand for halal products continues to rise, Bosnia’s contributions will become even more significant. By setting a benchmark for integrity and excellence, Bosnia is not only shaping the future of the halal industry in Europe but also inspiring the world to follow suit.

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BUSINESS & ECONOMY

Yousef Khalawi Outlines Strategies to Shape the Future of the Global Halal Economy at MFH 25

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3 weeks ago

March 4, 2025

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Hafiz M. Ahmed

In a talk at the Makkah Halal Forum 2025 , H.E. Mr. Yousef Khalawi , Secretary General of the Islamic Chamber of Commerce and Development (ICCD), shared his vision for shaping the future of the global halal economy. The session, titled “Strategies Shaping the Future of Halal,” was moderated by Dr. Wael Eldesouki Bedda , Secretary General of the Saleh Kamel Sustainable Entrepreneurship & Enterprise Development Organization (SKSEED), and provided attendees with a roadmap for driving innovation, sustainability, and inclusivity in the rapidly growing halal sector.

During the 20-minute interview, Mr. Khalawi emphasized the transformative potential of the halal industry,He outlined key strategies to position the halal economy as a force for ethical trade, environmental stewardship, and cross-border collaboration.

“The halal economy is not just about compliance—it’s about creating value that benefits humanity and the planet,” Mr. Khalawi stated. He highlighted the importance of aligning halal practices with the United Nations Sustainable Development Goals (SDGs), ensuring that growth in the sector contributes to poverty alleviation, gender equality, and climate action.

One of the central themes of the discussion was the role of technology in advancing the halal ecosystem. Mr. Khalawi praised the integration of blockchain, artificial intelligence (AI), and e-commerce as tools to enhance transparency, traceability, and consumer trust.

“Digital solutions are revolutionizing the halal supply chain,” he explained. “From farm to fork, blockchain ensures that products meet halal standards at every stage, while AI optimizes resource use and reduces waste.”

He also called for greater investment in halal tech startups, urging governments and private sectors to support innovation in areas like halal pharmaceuticals, logistics, and fintech.

Mr. Khalawi underscored the critical role of small and medium enterprises (SMEs) and women entrepreneurs in driving the halal economy forward. “SMEs are the backbone of the halal industry, and women are its untapped potential,” he said.

He highlighted initiatives led by the ICCD to provide training, funding, and market access to SMEs, particularly in underserved regions. Similarly, he praised programs empowering women entrepreneurs, noting that their leadership is essential to fostering inclusivity and innovation.

The interview also addressed the need for harmonized global standards to facilitate trade and build consumer confidence. Mr. Khalawi stressed the importance of partnerships between international organizations, governments, and private sectors to overcome barriers such as certification inconsistencies and trade restrictions.

“Unified standards are the foundation of trust,” he asserted. “By working together, we can create a seamless halal ecosystem that benefits producers and consumers alike.”

Mr. Khalawi commended Saudi Arabia’s leadership in advancing the halal agenda, aligning with the Kingdom’s Vision 2030 goals. He noted that Makkah’s unique position as the spiritual heart of the Islamic world makes it an ideal hub for fostering collaboration and innovation in the halal sector.

“Makkah is not just a host—it is a symbol of unity and ethical leadership,” he said. “This forum is a testament to the Kingdom’s commitment to shaping the halal future.”

Concluding the session, Mr. Khalawi issued a call to action for stakeholders across the halal ecosystem. “We must move beyond dialogue and take concrete steps to implement these strategies,” he urged.

Hafiz Maqsood Ahmed is the Editor-in-Chief of The Halal Times.

Courtesy: the Halal Times

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BUSINESS & ECONOMY

Can Trump Halt the BRICS De-Dollarization Effort?

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1 month ago

February 23, 2025

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Timothy Hopper

Various efforts to reduce reliance on the US dollar in global trade are putting the future of this dominant currency under a spotlight. Donald Trump, the newly elected US president, has returned to the global economic stage with the same aggressive style and approach as before. This time, Trump has set his sights on the BRICS group, launching threats and criticisms from the outset. BRICS, composed of major economies such as Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, is currently discussing the creation of a common currency that could challenge the dollar’s long-standing dominance in global trade.

Trump has responded to these moves with harsh rhetoric, threatening 100% tariffs and the complete exclusion of BRICS members from US markets should they continue to push for de-dollarization. Yet Trump’s remarks have drawn renewed global attention to the question of the dollar’s future.

Reacting to BRICS discussions about creating a rival currency or supporting the adoption of an alternative to the dollar—which would likely spell the end of the dollar’s dominance in global trade, a position it has held since World War II—Trump stated: “We urge these countries to abandon the idea of creating a rival currency or agreeing on an alternative to the dollar. Otherwise, they will face 100% tariffs, completely losing access to America’s unrivaled economic markets.” Recently, Trump also threatened to impose a 25% tariff on all imports from Canada and Mexico, along with an additional 10% tax on goods made in China.

On the surface, Trump’s tactics might seem like they could strengthen the dollar’s position; however, a deeper analysis suggests they will backfire. Instead of deterring BRICS countries, they might actually spur their efforts forward, with China in particular taking the lead to accelerate the de-dollarization process. Long suspicious of Washington’s use of the US dollar as a geopolitical tool, China has spent the last decade slowly building up alternative financial systems, for example by increasingly using the yuan for international trade settlement and expanding Beijing’s direct influence through the Belt and Road Initiative. The Chinese government has also diversified its foreign reserves, reducing its reliance on the US dollar in favor of gold and other currencies.

From this perspective, Trump’s statements are not a deterrent for BRICS countries but rather a rallying cry for urgent action. His persistent use of tariffs and sanctions as tools of economic diplomacy has not only deepened divisions between the United States and rival nations but also fueled distrust among US trading partners. This approach will undoubtedly drive other nations to seek alternatives to the dollar. China and Russia, as key targets of US sanctions and trade wars, are at the forefront of these changes, having signed agreements for trade in local currencies and deepened cooperation under the BRICS framework.

While the creation of a BRICS common currency or adoption of a US dollar alternative remains entangled in logistical and temporal challenges, the initiative symbolizes the bloc’s collective determination to build a financial system that is less reliant on the United States. Trump’s repeated threats may disrupt these efforts in the short term, but they will inevitably validate the concerns underlying these initiatives: the fear that the United States wields its economic power with little regard for long-term global financial stability, and solely in pursuit of its own unilateral interests.

For China, locked in strategic competition with the United States, shaping a new and favorable global order extends beyond economics. These initiatives are part of Beijing’s broader ambitions to establish itself as a global superpower. A multipolar financial system would reduce China’s and other BRICS countries’ vulnerability to US economic pressures, granting them greater freedom to pursue strategic goals on regional and global scales. For example, China’s digital yuan project is part of this vision, potentially serving as an alternative to dollar-based international payment systems, particularly in emerging markets.

Ultimately, the dollar’s dominance has been built primarily on trust—a belief that the United States will act as a responsible leader in the global economy and that dollar-based assets will remain stable and accessible. However, by weaponizing the dollar through sanctions and tariffs, Trump risks undermining this trust, not just among adversaries but also among allies. As this trust wanes, the dollar’s status as the world’s reserve currency is also weakened.

The paradox of Trump’s aggressive posture toward de-dollarization is that by favoring tariffs and sanctions, Trump is accelerating the very trends he seeks to combat. If he fails to change course, the world may soon find itself more united against Washington.

Courtesy: Geopolitical Monitor

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