Testing fiscal sustainability under inter-temporal budget constraint in Saudi Arabia

This paper tests fiscal sustainability for Saudi Arabia under the inter-temporal budget constraint for the variables of public revenues and expenditures as ratio of GDP for the period 1980-2014. Both variables are found stationary at their first differences. Cointegration result proves the cointegrating relationships but the slope of public expenditures on public revenue is found to be less than one. Therefore, this study concludes about weak fiscal sustainability in Saudi Arabia and suggests fiscal reforms to maintain a strong sustainability.