The year 2000 couldn’t have been more auspicious for Saudi Arabia, with the kingdom enjoying peak production levels and record crude prices to post the first budget surplus in nearly 20 years. Riyadh is also banking on strong enough prices, despite the expected lowering of its output, to produce a balanced budget for 2001.
The Saudi government had forecast a 2000 budget deficit of 28 billion riyals ($7.46 billion) — based on presumed income of 157 billion riyals ($41.86 billion) and anticipated spending of 185 billion riyals ($49.33 billion). However, the finance ministry — in a statement after the release of the 2001 budget forecast — issued actual figures for 2000, suggesting a 45 billion riyal ($11.99 billion) surplus for 2000.
The ministry said that actual income is expected to hit 248 billion riyals ($66.13 billion) for this year, while the kingdom spent closer to 203 billion riyals ($54.13 billion). The Saudi government also spent some of the revenue it earned this year to pay part of its debt and outstanding arrears to local farmers and contractors, without having to eat into the surplus.
In projecting its 2001 budget, Riyadh suggests that it will spend exactly the same amount as it brings in — 215 billion riyals ($57.3 billion) — to produce a balanced budget. Any surplus it may achieve will be dedicated to paying public debt, the government said.
Based on actual expenditures for 2000, the kingdom is forecasting a modest 6 percent boost in spending for next year. “That means that it’s not going to be swayed by the surplus and go crazy on spending,” one Saudi tracker tells Oil Navigator.
Although Riyadh earned about $24.2 billion more in income than it had forecast for 2000, it is expecting to earn about $15.4 billion less next year then it did in 2000. That conservative estimate is considered realistic by many economists, who point out that not only are international crude prices expected to be lower than the record prices reached in 2000, but that Saudi Arabia and its other OPEC colleagues will likely cut output in the coming quarters as supply greatly outstrips demand.
“The Saudis were in the rare position in 2000 of producing at their highest level in years, while basking in sky-high prices,” tells Oil Navigator. — ( Oil Navigator )