Saudi Arabia racks up record budget surplus

RIYADH - Saudi Arabia's 2005 budget surplus is expected to double to a record 214 billion riyals ($82 billion), which it intends ploughing into infrastructure projects and cutting debt.

The world's biggest crude oil exporter is running its third budget surplus in a row after two decades when low oil prices left the Government in the red and struggling to finance its generous welfare system.

The Government said revenues for 2005 would reach 555 billion riyals, almost twice as much as its initial forecast, while expenditure would hit 341 billion riyals.

"This year's performance reflects the powerful oil market, leading to the highest budget surplus in Saudi history," said Brad Bourland, chief economist at Samba Financial Group in Riyadh.

Last year's budget surplus stood at 107 billion riyals. A Finance Ministry statement predicted a 55 billion riyal surplus next year.

Economists say the Government based its 2006 budget on a Saudi crude oil price forecast of US$35 ($50) a barrel. This year, US crude oil prices peaked at just over US$70 a barrel in early September and have since fallen to around US$60.

Inflation remains tightly controlled despite the economic boom, with the cost of living index rising just 0.4 per cent this year and non-oil GDP deflator, seen by economists as a more accurate benchmark for inflation, up 1.14 per cent.

"It is probably the best economic year ever for the kingdom," said Riyad Bank chief economist Khan Zahid.

The ministry estimated the non-oil industry sector, which the Government has targeted for growth to reduce dependence on oil revenues, would expand by 8.4 per cent this year. It added that the current account surplus would hit 326.5 billion riyals, up 68 per cent from 2004.

The surging Government revenues have allowed Saudi Arabia to trim public debt from a recent peak of 119 per cent of gross domestic product (GDP). Debt should fall this year to 475 billion riyals, or 41 per cent of GDP.

"The budget surplus will be utilised ... to retire part of the stock of public debt, implement a special programme of infrastructure projects, and replenish the resources of development funds," the ministry said.

The Government could allocate 87.3 billion riyals for education and manpower development in 2006, 31 billion riyals for health and social affairs and 22.5 billion riyals for water, agriculture and infrastructure. Improved education and vocational training is another key part of Government strategy to find jobs for hundreds of thousands of Saudi graduates and cut reliance on 6 million foreign workers. 

- REUTERS