Chart 16: Breakdown of non-hydrocarbon fiscal revenues Chart 17: Budgeted non-oil subsidies form a small portion of spending 40 ma Non-oil revenues (SARbn) SARbn rs —— % of total non-oil revenues 50 — Budgeted subsidies 7 25 45 == % of total budgeted spending (rhs) 6 20 40 15 35 5 30 4 0 5 pl ™~ £2885 8388883 83 8 *8 20 a ® 25% 2& 8 F ZLLL sg eQ —£E &§ 3s 82a NnN FF F&F ue wo YY D 15 2 88 28 5 es 2s 5 10 JAA —s 826565 8S ££ S 325 1 5s 8 3 £& 9 — 5 _— 6 6 € Bg 5 & 6 se rs) =&£ GD 2 0 0 e oF 8 2 =MMONnAOrMMORATMONRAW MW s - 8 SESSSSSSSSSSSR SSSR Source: MoF, BofA Merrill Lynch Global Research. Data as of 2015. Source: SAMA, MoF, Bank of America Merrill Lynch Global Research. Further energy subsidy reform is likely The figures announced by the Deputy Crown Prince regarding proceeds of subsidy reform suggests material changes over the next 3-4 years, with annual savings close to the landmark first round of administered price changes in late 2015. However, his suggestion that the changes could be accompanied by partially offsetting cash transfers to poor households suggests policy-making caution. We do not think such a redistributive system could be technically put in place in a short time span. Recall that concurrently with the 2016 budget, a first round of energy subsidy reform saw sweeping energy, water and electricity administered price changes being instituted in late December. We estimated the natural gas price hike on petrochemical firms, domestic crude oil price hike as well as the combined gasoline and diesel price hike introduced could add US$2.2bn, US$2.0bn and US$3.8bn to central government revenues if fully passed to the budget (a combined 1.2% of GDP). Impact of continued similar policies on domestic prices would be a further 1.5-2ppt annual increase in headline inflation, and a gradual squeeze to household incomes (where gasoline, water and electricity likely represented c.1.5%, c0.4% and 1.6% respectively of consumer spending basket prior to the late Dece