Saudis to Use Internal Funds to Cover Deficit

Saudi Arabia, the world’s largest oil producer, said it won’t borrow money on the international markets to finance next year’s budget deficit, which is forecast to reach $12 billion, the country’s finance minister said Sunday.

Saudi banks and “national reserves are capable of meeting the shortfall,” said the kingdom’s finance minister, Ibrahim al-Assaf, the official SPA news agency reported. “We can cover the budget deficit either through issuing bonds or through domestic borrowing,” he said.

The government of the Middle East’s largest economy, which relies on oil sales for 75% of its revenue, released its 2002 budget early Sunday. It expects the deficit next year to be its largest since 1998, when Saudi Arabian crude oil sold for an average of $12 a barrel.

Increased debt, which is already larger than the country’s gross domestic product, will put the desert kingdom under further pressure as it struggles to deal with 25% unemployment and sustain a welfare state for 14 million people.

The new budget forecasts government revenue will slide by 27%, to $42 billion, while expenditures are expected to reach $54 billion. The drop in revenue from more than $57 billion this year is due to cuts in oil output at the same time as a decline in prices.

Crude oil for January delivery closed on Friday at $19.04 a barrel on the New York Mercantile Exchange, more than 30% lower than this year’s average price. Saudi crude trades at about $3 a barrel less than in New York.