Saudi public debt seen at lowest level in decades

Strong oil prices allied ally with a surge in its crude output to depress Saudi Arabia’s domestic debt by nearly SR31 billion in 2011 and the debt is expected to dip this year to its lowest level in more than two decades.

Expectations crude prices will remain high will also boost the official foreign assets of the world’s oil powerhouse to a new peak of nearly $694 billion at the end of 2012 before climbing to an all time high of $726 billion at the end of 2013, according to the Riyadh-based Jadwa Investments.

From SR167 billion at the end of 2010, Saudi Arabia’s public debt shrank to nearly SR136 billion at the end of 2011, when the Gulf kingdom recorded a budget surplus of SR306 billion, its second highest after the 2008 record high surplus of around SR580 billion, the report showed.

Jadwa expected the debt to recede further to around SR115 billion at the end of 2012 and SR100 billion at the end of 2013, its lowest level since 1980s.

The debt had dived by nearly SR58 billion in 2010 when the Kingdom recorded a fiscal surplus of around SR109 billion. It was also cut by just SR12 billion through 2009 although the budget suffered from a deficit of SR87 billion.

Jadwa based its projection on another fiscal surplus of SR91 billion in 2012 and nearly SR14 billion in 2013. It forecast oil prices to slip from around $105 a barrel in 20111 to $92 in 2012 and $86 in 2013 while the country’s crude production is projected to fall back from 9.3 million bpd to 8.8 million bpd in 2012 before rebounding to nearly nine million bpd in 2013.

Its figures showed the decline in debt pushed down its ratio to GDP from around 9.9 per cent at the end of 2010 to 6.3 per cent at the end of 2011. It projected the ratio at nearly 5.6 per cent in 2-12 and 4.7 per cent in 2013.

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 slide 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 ever budget surplus due to a surge in average oil prides to an average of $95.

The report showed the surge in Saudi Arabia’s income boosted its gross official reserves to a record high of $634 billion at the end of 2011 from nearly $520 billion at the end of 2010. It expected them to hit another peak of $694 billion at the end of 2012 despite a massive financial handout for citizens announced by King Abdullah in 2011, involving spending of nearly $135 billion.

The report projected the country’s actual revenue this year to soar to SR824 billion against a projected SR702 billion. But it also expected actual expenditure to swell to nearly SR733 billion compared with a budgeted SR690 billion.

Oil export earnings, which grew to their highest level of $302 billion in 2011 are expected to fall back to $227 billion this year and $200 billion in 2013.

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