Saudi 2011 bud­get seen in $20 bil­lion sur­plus

The Pak Banker - - Company& -

RIYADH: Top oil ex­porter Saudi Ara­bia, which pro­jected a bud­get deficit in 2011, is likely to post a 77bn riyal ($20.5b) sur­plus based on an oil price of $80 a bar­rel, ac­cord­ing to a re­search.

State-owned Na­tional Com­mer­cial Bank (NCB) pre­dicted the king­dom would also sur­pass its spend­ing and rev­enues fore­casts, say­ing both were "un­der­stated."

Last week, Saudi Ara­bia said it would spend 580b riyals ($154.657b) next year in a push to cre­ate jobs for a fast grow­ing pop­u­la­tion. It pro­jected rev­enues of 540b riyals, re­sult­ing in a 40b-riyal deficit. Gulf Arab states typ­i­cally base their bud­gets on a very con­ser­va­tive oil price, which they do not re­veal. NCB fore­cast rev­enues of 753b riyals and ex­pen­di­tures of 677b riyals, based on an av­er­age oil price of $80 a bar­rel for the Ara­bian light crude and an oil out­put of 8.5mn bpd on av­er­age. "This would lead in turn to a bud­get sur­plus of 77bn riyals, or 4.2 per­cent of es­ti­mated GDP in 2011," the bank said. Global bench­mark U.S. crude fu­tures, which hit a 26-month high of $91.63 on Thurs­day, did not trade on Fri­day with the Nymex floor closed for the Christ­mas hol­i­day while OPEC's ref­er­ence crude bas­ket, which in­cludes Saudi's Arab light, was at $90.02 a bar­rel on Wed­nes­day.

OPEC's most in­flu­en­tial oil min­is­ter, Saudi Ara­bia's Ali al-Naimi said on Fri­day he was still happy with an oil price of $70-80 a bar­rel.

The Saudi econ­omy is heav­ily de­pen­dent on oil-it ac­counted for about 85% of its bud­getary rev­enue in 2009 and around 31% of its GDP-leav­ing the king­dom ex­posed to price volatil­ity.

The king­dom, the biggest Arab econ­omy, has ac­cu­mu­lated huge re­serves dur­ing a sixyear oil price boom and is plan­ning to spend more than $400b over the five years to 2013 to up­grade in­fra­struc­ture, in­clud­ing air­ports and roads.

Net for­eign re­serves held by the Saudi cen­tral bank rose to $429b in the first 10 months of this year, from $405b at the end of 2009, leav­ing of­fi­cial for­eign re­serves able to cover more than 59 months of im­ports. NCB fore­cast the cen­tral bank's net for­eign as­sets will grow based on higher oil rev­enues in 2011. "These as­sets will con­tinue to pro­vide an im­por­tant buf­fer to pro­tect the Saudi econ­omy from volatil­ity of oil prices or ex­ter­nal fi­nanc­ing dif­fi­cul­ties." The bank also said non-oil rev­enues may ex­ceed 83b riyals, 25 per­cent above ac­tual lev­els in 2010. Mean­while, Saudi money sup­ply growth was steady at 3.7 per­cent on the year in Novem­ber com­pared with the pre­vi­ous month, and the cen­tral bank's for­eign as­sets in­creased 11.5 per­cent year on year, data from the Saudi Ara­bian Mon­e­tary Agency (SAMA) showed on Wed­nes­day.

M3, the broad­est mea­sure of money sup­ply, came in at SR1.061 tril­lion ($283.01 bil­lion) in Novem­ber, up from SR1.023 tril­lion in the same month a year ago, and from SR1.041 tril­lion in Oc­to­ber, ac­cord­ing to data posted on SAMA's web­site.

SAMA's net for­eign as­sets rose to SR1.627 tril­lion in Novem­ber from SR1.610 tril­lion in Oc­to­ber and SR1.459 tril­lion in Novem­ber 2009, the data showed. Saudi Ara­bia has drawn on its re­serves to fund record bud­gets and keep its $400 bil­lion five-year in­fra­struc­ture devel­op­ment pro­gram on track. While this spend­ing helped the econ­omy grow last year, ac­cord­ing to the King­dom's bud­get re­leased last De­cem­ber, banks have re­mained hes­i­tant to ex­tend credit. -PB News

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