Saudis to Use Reserves to Meet ’87 Budget

Saudi Arabia has announced that it will have to dip into petrodollar reserves to meet its $45.3-billion budget for fiscal 1987.

It marks the first time that Saudi Arabia, the world’s largest exporter of crude oil, has conceded a need to use part of its $90 billion in reserves to meet a deficit, which is projected at about $14 billion.

The Saudis, who announced the 1987 budget on Wednesday, said oil sales would account for nearly 56% of revenue, or $17.4 billion. Other income is expected from petrochemical plants and oil companies owned by the government.

The royal decree came after the kingdom twice acknowledged that it could not calculate income because of the instability of the world oil market.

A glut in the world oil market sent prices plummeting to less than $10 a barrel in 1986. The Organization of Petroleum Exporting Countries cartel then agreed to a 7% production cut in an effort to boost prices to $18, and the Saudi quota was slashed to 4.13 million barrels a day.

In 1980, the kingdom’s oil revenue was estimated at $100 billion, or 87.6% of overall income. Saudi Arabia produced about 11 million barrels a day then.

The Saudi fiscal 1987 budget indicated the kingdom projects an output of less than 4 million barrels a day, on the basis of $18 a barrel. Sources close to the Finance Ministry, who spoke on condition of anonymity, said the budget was based on exports of 3.1 million barrels daily and 700,000 barrels for domestic consumption.

Defense and security, with the largest allocation, $16.2 billion, was cut by 5.9%.