Arab Today, arab today ksa to spend more shielded from euro crisis
Last Updated : GMT 23:57:56
Arab Today, arab today
Arab Today, arab today

KSA to spend more, shielded from euro crisis

Arab Today, arab today

Arab Today, arab today KSA to spend more, shielded from euro crisis

Riyadh - Arabstoday

Saudi Arabia may feel only a limited impact from the euro zone debt crisis and will not cut spending even if there is a fall in oil prices, the main source of revenue for the world\'s leading crude exporter, top government officials said on Tuesday. Partly in response to unrest in the Arab world, the Saudi government boosted expenditure to a record SAR804bn (US$214bn) in 2011, 39 percent more than initially planned and 24 percent higher than in 2010, its fastest growth in a decade. The desert kingdom has seen only small protests by a Shi\'ite minority in its oil-producing Eastern Province, nowhere near the turmoil experienced by some other Arab countries in the Middle East and North Africa. \"We are now ending the fifth month of the budget and the situation for revenues and spending is as expected. Revenues exceed our expectations a little bit, spending is the same pace that we expected earlier in the year,\" Finance Minister Ibrahim Alassaf said. \"There might be extra spending, but the fiscal position is comfortable to the extent that we don\'t expect to have problems funding the extra spending,\" he told reporters on the sidelines of a financial conference in the Saudi capital. Asked whether spending would be higher overall this year than the ministry\'s original target of 690 billion riyals, Alassaf said: \"I expect it to increase. How much, I can\'t answer you now.\" In the past decade, the government has overshot its annual budget plans by an average 23 percent, which would imply spending of SAR849bn in 2012, up 6 percent from last year, according to Reuters calculations. Oil prices have been edging closer to lows last seen in January as markets fret about the impact of Greek political disarray on Europe\'s economy and whether China can sustain growth. Crude receipts make up around 85 percent of the Saudi government budget. Saudi Arabia\'s heavy dependency on oil has risen since it announced fiscal packages last year worth a combined US$110bn, or some 19 percent of gross domestic product. The kingdom\'s non-oil primary deficit was expected to reach 81 percent of non-oil GDP last year, up from 40 percent in 2004, while the price of crude needed to balance the government budget is projected to rise to US$98 per barrel by 2016 from an estimated US$80 in 2011, the International Monetary Fund has said. Alassaf also expected to see more corporate Islamic bonds, or sukuks, and conventional bonds being issued in the near future, including some by government agencies but not at the sovereign level. \"I see more sukuks and bonds being issued in future including from government agencies that have the ability to generate income and operate commercially,\" he said. Asked if that meant this year, he said: \"Why not?\" A number of Saudi entities have issued local currency sukuk this year as interest in the country\'s debt market grows on the back of high investor liquidity and a desire to diversify funding sources away from bank loans. The largest of these was a SAR15bn (US$4bn) trade from the General Authority for Civil Aviation in January. Saudi inflation has been holding above 5 percent since September and Economy and Planning Minister Muhammad al-Jasser later told reporters at the same event inflation should remain stable in the short to medium term. The OPEC member\'s annual inflation rate edged slightly lower to 5.3 percent in April from 5.4 percent in March and February. Inflation is mainly fuelled by upward pressure from higher food and rents but it is far below a record high of 11.1 percent hit during an oil boom in July 2008. Jasser, formerly governor of the kingdom\'s central bank, also said that any impact from Europe\'s debt crisis on Saudi Arabia would be limited, thanks to Europe\'s efficient use of oil and Saudi Arabia\'s \"negligible exposure\" to European banks. \"If Europe has a serious recession it will affect the whole world, but it will affect us less,\" Jasser said. \"Our ability to maintain a good level of spending will be okay. Jasser said he was hoping to see economic growth of around 6 percent in 2012, below last year\'s 6.8 percent, adding that it was difficult to estimate growth in the oil sector now. From / Arabian Business

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