Saudi has world’s third-lowest public debt

Saudi Arabia became one of three least indebted nations at the end of 2012 after the world’s top oil exporter slashed its public debt to below SR100 billion for the first time in nearly 15 years, according to a local report.

A massive fiscal surplus caused by a surge in hydrocarbon export earnings allowed the Gulf Kingdom to trim its public debt to SR98.8 billion (Dh97.8 billion) at the end of 2012 from nearly SR135.5 billion (Dh134 billion) at the end of 2011.

Saudi Arabia, by far the largest Arab economy, announced the debt reduction just before the end of 2012 when it released its long-awaited budget, the largest in the country’s history and the highest in the Arab region.

The report by King Saudi University in Riyadh showed the debt accounted for nearly 3.6 per cent of GDP in 2012, a decline of around 27 per cent over the previous year. The debt-to-GDP ratio shot above 100 percent in late 1990s, when the Kingdom reeled under massive fiscal deficits due to low oil prices.

“This means Saudi Arabia had the world’s third lowest public debt relative to GDP in 2012,” said the report, carried by the Saudi daily Aleqtisadiah.

“This was achieved following a large surplus in the budget in 2012 because of a surge in crude prices…the remaining part of the surplus is expected to be used to bolster the Kingdom’s financial position and fund more local projects.”

Saudi Arabia’s public debt was estimated at around 6.3 per cent of GDP at the end of 2011 after it was cut from around SR167 billion (Dh165 billion) at the end of 2010 when higher prices created a budget surplus of about SR88 billion.

Experts said Riyadh has sufficient financial surpluses to wipe out the debt altogether following a sharp rise in its foreign assets over the past few years to reach a record high of around SR2,392 billion at the end of October.

But they added that Saudi Arabia, which controls over 15 per cent of the world’s recoverable oil deposits, is intentionally keeping part of the debt as a monetary tool aimed at absorbing any excess liquidity in the domestic market.

Saudi Arabia has used strong oil prices over the past 10 years to tackle its festering public debt caused by massive fiscal deficits due to weak crude prices, low oil production by the Kingdom and high public spending during the 1990s.

Official data showed the sovereign debt climbed to its highest ever level of SR689 billion at the end of 1999 before plunging to nearly SR660 billion at the end of 2002. It remained almost unchanged by the end of 2003 before it began its rapid decline in the following years to reach SR614 billion at the end of 2004.

At the end of 2005, the debt plummeted to SR475 billion and continued its plunge to reach about SR267 billion at the end of 2007, nearly 18.7 per cent of Saudi Arabia’s nominal GDP of SR1,430 billion.

The debt was sharply cut in 2008 after Saudi Arabia recorded its highest budget surplus due to a surge in average oil prides to an average of $95 a barrel.

Just before the end of 2012, Riyadh announced a record budget for 2013, forecasting spending at SR820 billion and revenue at SR829 billion, leaving a budgeted surplus of SR nine billion. Projections by the Saudi National Commercial Bank showed the actual surplus could soar to SR277 billion, expecting actual revenue to rocket to SR1,147 billion.

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