The finance ministry forecast a surplus for 2008, the sixth in a row, after two
Government debt would fall to 19 per cent of gross domestic product by the end of 2007 compared with 28 per cent of GDP in 2006, the finance ministry said in a statement on Monday.
A near five-fold increase in oil prices since 2002 has allowed
The government set aside 53.5 billion riyals ($14.27bn) from the
"They have to strike a balance and try to make sure that money supply doesn't
"If they pay it all back too quickly there will be too much liquidity in the market," he said.
In 2005 Finance Minister Ibrahim al-Assaf promised to reduce public debt to almost zero. Since then inflation has surged, hitting its highest in at least 12 years in October and money supply, an indicator of future inflation, is near a three-year high.
The Saudi central bank can do little to contain inflation because it must follow U.S. monetary policy to maintain the riyal's peg to the dollar. If it severs the peg,
which the finance ministry said would grow 3.5 per cent in 2007 compared with 4.3 per cent last year.
"Mostly it was OPEC production cuts," said John Sfakianakis, chief economist at SABB bank, HSBC's Saudi affiliate. "Next year, with production going up, growth should be closer to 5 per cent," he said.
The OPEC agreed to cut output by a total of 1.7 million barrels in two
The non-oil industrial sector would grow 8.6 per cent in 2007, the ministry said.
The 2008 budget forecast expenditure of 410 billion riyals and revenues of 450 billion riyals, the ministry said. Saudi budgets are usually based on conservative oil-price forecasts. Last year the ministry said it expected a 2007 surplus of $5.3 billion.
The government will spend 105 billion riyals on education and 44.4 billion riyals on health and social development, the ministry said.
The 2008 spending target is about 7 per cent higher than this year's.
The 2008 budget "suggests an assumed price of around $50 a barrel," said Simon William, regional economist at HSBC in Dubai.
U.S. crude oil for January delivery was trading around $88 a barrel on Monday. (Reuters)