Arab fiscal surplus declined after hitting record high previous year

Arab nations basked in the highest fiscal surplus in their history in 2008 after netting record oil earnings but the balance is expected to have plunged in 2009 because of lower crude prices and production.

Official figures showed the combined budget surplus in the Arab League's 21 members swelled to an all time high of $251.9 billion (Dh922bn) in 2008, more than double the 2007 surplus of $114.8bn.

The UAE, Saudi Arabia and Kuwait accounted for more than 80 per cent of the total balance in 2008, with their combined surplus standing at around $203bn, showed the figures by the Abu Dhabi-based Arab Monetary Fund (AMF), a key financial establishment of the Cairo-based Arab League. Analysts said they expected a sharp fall in the Arab fiscal surplus in 2009 as a result of nearly $35 drop in crude prices and a sharp cut in the region's crude output, mainly by Saudi Arabia, the UAE and Kuwait.

"I think there was a surplus in the overall Arab fiscal balance last year but it was sharply lower than in 2008," said Ihsan bu Hlaiga, a Saudi economist.

"Some members have already announced they recorded a small deficit, mainly Saudi Arabia…Kuwait had a surplus as it restrained spending while Qatar could also have a surplus in the current fiscal year."

The AMF report showed Arab nations recorded their highest fiscal surplus in 2008 after their total revenues soared by nearly $239 billion to an all time high of around $817.8 billion (Dh2.99 trillion) last year compared with 2007.

Their oil export earnings leaped by $188 billion to a record $623.9 billion (Dh2.29 trillion) after crude prices hit a record average $94.5 a barrel.

Experts expect the Arab oil income to have tumbled below $400bn in 2009 after crude prices dipped to nearly $60 a barrel and the region pumped around two million barrels per day below its 2008 crude output. The 2008 fiscal surplus climbed to a record high level despite a sharp rise in spending, which jumped by around $101bn to a record $568bn (Dh2.08 trillion).

The bulk of the increase was in the expenditure of the UAE, Saudi Arabia, Algeria, Iraq, Libya, Egypt and Morocco. The 2008 budget included record development spending of around $168bn as it accounted for 29.8 per cent of the total expenditure. The rest was in current spending, which included around 24.7 per cent for defence and security, 23.4 per cent for public services, 31.4 per cent for social services and about 9.1 per cent for economic sectors.

A breakdown showed Saudi Arabia, the world's oil superpower which accounts for more than a-fifth of the Arab economy, had the largest Arab fiscal surplus of $145.9bn in 2008. Kuwait had the second largest at $33.3bn, followed by Iraq at $22.5bn, Libya at $22.6bn and the UAE at about $15bn, the AMF report showed.

The countries which recorded a deficit in 2008 were Jordan, Tunisia, Sudan, Syria, Lebanon, Egypt, Mauritania and Yemen.

The surge in the combined Arab fiscal surplus in 2008 boosted its share of the GDP to a record 13.3 per cent from 7.6 per cent in 2007 and as low as 0.2 per cent in 2003. The balance was in a deficit in most members during the 1990s, when oil prices and production were relatively low.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.