JEDDAH, 10 December — The Kingdom will not resort to foreign borrowing to meet the SR45 billion ($12 billion) deficit in its 2002 budget announced on Saturday in which revenues were projected at SR157 billion ($41.9 billion) and expenditures at SR202 billion ($53.9 billion).

Finance and National Economy Minister Dr. Ibrahim Al-Assaf ruled out yesterday any foreign borrowing saying local financial institutions and national reserves were capable of meeting the deficit. There was sufficient capacity to cover the budget deficit either through issuing bonds or through internal borrowing, he added.

“Saudi financial establishments and national reserves are capable of meeting the shortfall. The position of our banks is excellent,” Assaf told a press conference following the Cabinet approval of the budget at a special session in Makkah chaired by Custodian of the Two Holy Mosques King Fahd.

The deficit is the largest since 1998 when average price for oil was just over $12 a barrel and output was 8.3 million barrels per day.

The sharp drop in revenues from a projected SR215 billion ($57.3 billion) for 2001 follows a major decline in oil prices after the Sept. 11 attacks in the United States and cuts in production.

The minister said the new budget has been prepared “under extreme conditions marred by difficulties and challenges as a result of the direct decline in oil prices” which led to lower revenue and expenditure projections than those of last year.

He estimated the internal debt at the end of 2001 to exceed SR630 billion ($168 billion), just under the country’s Gross Domestic Product (GDP) of SR668 billion ($178 billion).

The debt, obtained from local Saudi banks and financial institutions, is tipped to rise next year as the deficit increases.

“Looking at the current budget we note that it was in good shape during the first quarter of the year regarding both revenues and expenditure.

However, during the second half there were developments in the world economy which affected the oil market and this reflected on the revenues. But despite the difficulty, there is continuity in next year’s budget in approving projects in various sectors which are vital to the citizen’s living,” the minister said.

He stressed that the Kingdom would continue with privatization plans especially for electricity, telecommunications, national carrier Saudi Arabian Airlines, sewage, water desalination and other sectors.

The minister said revenues in the current year’s budget are estimated at SR230 billion ($61.3 billion), seven percent more than the projected SR215 billion. Expenditures are estimated at SR255 billion ($68 billion), about 18.6 percent higher than the projected SR215 billion.

The balance of payments surplus for 2001 was estimated at SR31.3 billion, down from last year’s SR53.7 billion.

Dr. Assaf said the government has been very careful to avoid burdening Saudi citizens through the new budget which includes SR28 billion in allocations for new projects, in addition to SR54.3 billion for education, higher education and manpower training.

The Cabinet issued a freeze on new jobs for next year in various government agencies, but jobs already in the pipeline would be maintained. Dr. Al-Assaf said more than 86,000 jobs for both male and female teachers have been sanctioned in the new budget.

Under the current development plan (2000-2005) the government was planning to employ more than 817,000 Saudis by replacing 488,600 foreigners and creating 328,000 new jobs mostly in the private sector.

Current expenditure normally accounts for more than 85 percent of total expenditure, with capital spending taking the remaining 15 percent, a major structural distortion in the Saudi economy. The minister said wages account for 55 percent of the budget allocations and with additional expenses the figure amounts to more than 60 percent.