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EU Agrees Long-delayed Reform of Fiscal Rules

After weeks of discussions, EU negotiators agreed to set annual targets for cutting public debt and limits for public spending.
After weeks of discussions, EU negotiators agreed to set annual targets for cutting public debt and limits for public spending.
TT
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EU Agrees Long-delayed Reform of Fiscal Rules

After weeks of discussions, EU negotiators agreed to set annual targets for cutting public debt and limits for public spending.
After weeks of discussions, EU negotiators agreed to set annual targets for cutting public debt and limits for public spending.

The EU has agreed a much-delayed reform of its fiscal rules, in a move that economists say will usher in an era of tighter budgets, even as European growth prospects are set to weaken.

After weeks of discussions, EU negotiators on behalf of governments and the European parliament on Saturday agreed to set annual targets for cutting public debt and limits for public spending — a key German demand.

The EU said in its press release on Saturday that the reforms address shortcomings in the current framework and seek to ensure that the framework is simpler, more transparent and effective, with greater national ownership and better enforcement.

"They take into account the need to reduce increased public debt levels, including as a result of the COVID-19 pandemic, in a realistic, gradual and sustained manner. The new framework also builds on the lessons learned from the EU policy response to the financial crisis where a lack of investment hampered a swift economic recovery," the statements read.

The new framework also introduces risk-based surveillance which differentiates between Member States based on their individual fiscal situations. This approach will adhere to a transparent common EU framework underpinned by safeguards to ensure that debt is put on a downward path (the debt sustainability safeguard) or provide a safety margin below the Treaty deficit reference value of 3% of GDP in order to create fiscal buffers (the deficit resilience safeguard).

"Both reforms and investment are needed to face new and existing challenges. They are also essential components of credible debt-reduction plans."

According to the report, the new framework will facilitate and encourage Member States to implement the measures needed to secure the green and digital transitions, strengthen economic and social resilience and bolster Europe's security capacity.

The European Parliament and the Council will now have to formally adopt the political agreement.

The new framework will come into operation next year, on the basis of plans that will be presented later this year by Member States.

"This leaves sufficient time for Member States to prepare their plans for the years to come. In 2024, fiscal surveillance will be based on the country-specific recommendations already issued in spring 2023."

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.