Saudi Arabia has announced a balanced budget for the New Year on top of a $12 billion surplus in 2000 — the first in 18 years — thanks to high oil prices, but resisted a spending binge. King Fahd outlined the main points of the fiscal 2001 budget at a cabinet meeting overnight Monday, saying revenues and expenditures would both run at $57.33 billion.
Economists estimated the budget was based on an average price of $22 for Saudi oil, up from between $18 and $19 for the 2000 budget. The government itself does not disclose its estimate. "Despite an extra $14 billion in oil revenues in 2000, the government has resisted the temptation to go on a spending spree," Brad Bourland, chief economist at Saudi American Bank, told AFP, welcoming the move given high domestic debts. "Priority has been given to balancing the budget and continued fiscal restraint, although public spending has increased six percent over actual spending in 2000, with the focus clearly on education and health care," he said.
Gross domestic product in the world's leading oil exporter and producer reached $164.8 billion in 2000, shooting up 15.5 percent from $142.6 billion the previous year, compared to a population growth rate of three percent.
According to analysts in the Saudi capital, the government will now be able to build on its estimated $90 billion in foreign currency reserves and pay off more of the public debt. "This growth is due to the spectacular rise in crude prices and increased oil production," the finance ministry announced. "Thanks to the price rises, the Saudi oil sector should attain growth of 39.4 percent in 2000."
Oil prices have tripled since mid-1999. But over the past three weeks, the price of an average barrel of Saudi oil has fallen back from $30 to $22.50.
The finance ministry said spending in the 2000 budget will have amounted to $54.1 billion against revenues of $66.1 billion. "The latest budget is perhaps the first forecast balanced budget in 15 years, but the 2000 budget was already in surplus for the first time since 1982," Bourland pointed out.
The ministry also forecast a surplus of $14.8 billion in the balance of payments for the current fiscal year due to increased exports in both oil and non-oil sectors. Late payments of $2.6 billion were made to contractors in 2000, it said.
The government has set aside $10.1 billion in the 2001 budget to create more than 27,000 new jobs in the education, communications, public services and health sectors. A sum of $14.2 billion is to be spent on the education and vocational training sectors next year, including construction of 800 schools.
Health and social development is allocated $5.8 billion dollars, with 34 hospitals or medical centers to be built, and $2.98 billion are set aside for the industrial and agricultural sectors. Earlier this month, King Fahd said development projects and public services would be given priority in the 2001 budget, underlining the role of public spending as the key engine of economic activity.
But according to the specialist Middle East Monitor, Saudi Arabia is unlikely to repeat its "annus mirabilis" of 2000. "The kingdom is unlikely to repeat the impressive figures recorded in 2000," it said, noting that OPEC was expected to cut oil production in early 2001 due to a combination of stock buildups and weaker demand growth.
The Saudi five-year plan for 2000-2004, meanwhile, has underlined the trend for an increased role of the private sector as part of widespread economic reforms. Riyadh had forecast a deficit of $7.46 billion in the 2000 budget, but the government used figures around a conservative oil price that fell well below actual prices. In 1999, the budget deficit hit $9.06 billion. — (AFP, Riyadh)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
