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Boom May Lead to Deficit for Saudis

From Associated Press

This kingdom’s economy is booming, but the costs of war may saddle the government with a first-quarter deficit larger than that for all of 1990, Western economists said today.

One of the Saudi government’s biggest costs is helping pay for the U.S. military machine that is fighting Iraq from its soil.

It has also promised aid to area nations harmed by the war and faces huge cleanup costs for the massive oil spill Iraq apparently caused in the Persian Gulf.

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“We’re talking about an exercise that is typically a budget-buster,” said one Western diplomat who specializes in the Saudi economy.

Economists say spending for the first quarter of 1991 could hit $30 billion, compared to revenue--mainly from oil--of $12 billion at most.

The deficit for 1990 was $16 billion--on revenue of $50 billion.

Most Western and Saudi sources refuse to discuss the Saudi economy except on condition of anonymity because the deficit is a highly sensitive issue.

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No one suggests that Saudi Arabia cannot ultimately absorb the costs, but the Saud family deposed a king in the early 1960s for spending the treasury dry. The anticipated deficit could force the Saudis to go to the international market to borrow. Or the government could impose taxes for the first time.

“They have never had to ask anything of their people before,” said one Western analyst. “They just had to sit here and tolerate the prosperity.”

Other possible sources of revenue include borrowing on the domestic market, where they have raised $30 billion in the last three years by selling bonds, or privatizing government assets such as the national airline, Saudia.

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The private sector, meanwhile, is enjoying a boom thanks to the extra million people in the kingdom--about 600,000 foreign troops as well as refugees from Kuwait.

Food processing plants that once operated at 70% of capacity are expanding to keep up with demand. Licenses for new businesses are up, and banks have reaped record profits.

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