Saudi Arabia to keep spending, sees no debt issues

JEDDAH (BestGrowthStock) – Saudi Arabia does not intend to raise spending beyond its plan in 2010 to keep inflation at bay and plans to cut debt below 10 percent of GDP before considering any bond issues, its Finance Minister told Reuters on Sunday.

Following are quotes from the interview with Finance Minister Ibrahim Alassaf.

ON $400 BLN STIMULUS

“I am certain that it is either on time or ahead of time, both in terms of the investment in the oil sector and inside the government.”

“The program has a life period of five years. Before the end of the five years we have to review the requirements of the economy, the resources, and other relevant factors before deciding to continue at the same pace or reduce it.”

ON DEBT

“We still have some way to go with regard to the stock of debt… We are still at about 16 percent of GDP, over 200 billion Saudi riyals.”

“So when we get to a level that we are comfortable with, here I am talking about below 10 percent then one could think of what is the appropriate benchmark, whether it is to continue issuing bonds or having a specific and project related sukuk or bonds.”

“These projects should all be income generating entities. They will play as a benchmark for the market, but again we have some way to go.”

“In an economy like Saudi Arabia where the government revenues depend to a major extent on oil revenues and with the volatility of oil prices we have to have different lines of defense in case we face a large decline in our revenues as we have seen in 2009 yet we were comfortable because we have different lines of defense.”

“We have what I would call ‘fiscal depth’ in our management of fiscal policy, mainly building up reserves and reducing — demolishing — debt.”

ON OIL PRICES

“I will not go as far as being concerned … There is a range of prices that are good for the market, the stability, the consumers and producers, between $70-90.”

“For that reason a drastic drop in oil price would disrupt this balance. As far as the budget is concerned we are not that concerned because our resources are adequate to meet the budgetary needs over the medium term.”

ON GROWTH

“The IMF projected a growth rate of 3.7 for this year, we have been more optimistic traditionally than the IMF and we have been proven right. So in that sense I expect it to be higher than 3.7.”

ON EURO ZONE CRISIS

“It is too early to see the impact. It depends on the duration of the uncertainty. Probably the first impact one would think of is the impact on the oil market, but again, the European economies are known to have low elasticity of demand for oil.”

“In a sense, demand does not change by the same magnitude as the changes in the growth rate in those countries so the direct impact would be minimum on the oil, that is my view.”

“The indirect impact, if uncertainty extends for a period of time, I mean the impact on other economies, then it could affect not only oil but the growth rate in general and demand for commodities, including oil.”

“Other impacts include those related to the changes in terms of trade as a result of exchange rate changes.”

“In a way the decline in the euro exchange rate would have a positive impact on those economies when it comes to trade and one could expect, if the euro stayed at this level or declined, it would affect the level of exports and imports from the euro zone.”

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(Reporting by Asma Alsharif; Editing by Hans Peters)

Saudi Arabia to keep spending, sees no debt issues