Saudi Arabia to stick to 2010 budget spending: finance minister

By Asma Alsharif

JEDDAH (BestGrowthStock) – Saudi Arabia will not push spending beyond its 2010 plan to keep inflation under control and plans to cut its debt before any new bond issues may be considered, the Gulf kingdom’s finance minister said on Sunday.

The world’s top oil exporter ramped up spending to help its crude-reliant economy sail through the global crisis, launching a $400 billion five-year plan in 2008, the largest stimulus relative to gross domestic product among 20 leading nations.

“We like to stick to our budget projections and appropriations, unless there are some unforeseeable circumstances that require extra spending,” Ibrahim Alassaf told Reuters in an interview.

“We don’t have plans to increase the spending more than what we have now … because the program we have now is at the right size and will not put pressure on resources and capacity of the economy, hence inflationary pressures,” he said.

A surge in oil receipts over the past has encouraged the OPEC-member’s government to exceed budgeted spending. The kingdom overspent its plan by 15.7 percent last year, after going over by 27 percent in 2008, Banque Saudi Fransi has said.

Riyadh drafted its 2010 budget with a 70 billion-riyal gap ($18.67 billion) and spending of 540 billion.

Economists have estimated it was based on a conservative oil price projection of $46 a barrel, which Alassaf did not confirm, while the breakeven for 2010 is seen at around $57 a barrel.

Analysts polled by Reuters expected a fiscal surplus of Saudi Arabia, which does not release monthly budget updates, to reach 4.8 percent of GDP this year.

Alassaf also said that spending within its $400 billion plan, that ends in 2013, was “either on time or ahead of time” and that the government would have to review before it is completed whether to keep the stimulus or reduce it.

Despite a slowdown in bank lending, Saudi inflation hit a 10-month peak of 4.9 percent in April. It is still well below double-digit rates seen during an oil boom of 2008.

DEBT REDUCTION

Saudi Arabia does not plan to roll over a riyal-denominated government bond worth $7.7 billion that matures in January and will also not consider tapping the debt market before lowering its public debt below 10 percent of GDP, Alassaf said.

“We still have some way to go with regard to the stock of debt … 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,” he said.

The kingdom’s debt stands at around 16 percent of GDP, amounting to over 200 billion riyals, he said.

“We don’t have an intention at this moment to roll over any debt. What we are doing now is retiring the debt whenever it matures so we are not yet at the point where we would think of rolling over those bonds or any other bonds,” Alassaf said.

The Saudi government has domestic bonds worth some $8.8 billion to mature mainly in 2011 with the largest $7.7 billion paper due on Jan 14, according to Reuters data.

OIL PRICES

Alassaf also said he was not concerned about a decline in oil prices, reiterating the kingdom’s official line that a price between $70 and $90 is good for the oil market and its stability.

“I will not go as far as being concerned … A drastic drop in oil price would disrupt the balance. As far as the budget is concerned we are not that concerned because our resources are adequate to meet budgetary needs over the medium term,” he said.

U.S. crude futures posted their worst monthly loss since December 2008 in May.

Alassaf also expected the economy, the top player in the Arab world, to grow more in 2010 than the International Monetary Fund’s 3.7 percent projection, while it was too early to see impacts of the euro zone debt crisis.

A Reuters poll saw Saudi Arabia, the country of some 26 million people, growing by 3.9 percent this year after a 0.6 percent rise in 2009.

($1=3.750 Saudi Arabian Riyal)

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(Editing by Martin Dokoupil, Souhail Karam and Hans Peters)

Saudi Arabia to stick to 2010 budget spending: finance minister