JEDDAH, 13 December 2005 — Saudi Arabia yesterday announced the largest budget in its history, projecting revenues at record SR390 billion and expenditures at SR335 billion. It allocated SR126 billion for new projects.
While unveiling the budget, Custodian of the Two Holy Mosques King Abdullah told the Cabinet’s budget session that the Kingdom had brought down its public debt to SR475 billion.
Finance Minister Ibrahim Al-Assaf predicted that the Kingdom’s total revenues in 2005 would reach SR555 billion with SR341 billion in expenditures. He said the surplus budget would be utilized to carry out welfare projects and cut public debts, as instructed by King Abdullah.
The Kingdom’s gross domestic product (GDP) was projected to grow in 2005 by 22.7 percent in current prices and by 6.54 percent in constant prices, reaching SR1.15 trillion and SR767.7 billion in current and constant prices respectively. Private sector GDP is projected to grow in constant prices by 6.7 percent.
Addressing the Cabinet, King Abdullah said the new budget was designed to accelerate the development process and improve the living conditions of citizens. “We have set aside 26 percent of the budget for education and training,” the king said, emphasizing the significance of an educated, skilled work force.
The budget has given the utmost importance to scholarship programs in order to help Saudis master modern science and technology. “We have instructed authorities to set up a big program for scholarships in important specializations,” the king said.
Education and manpower training received the highest allocation of SR87.3 billion against last year’s SR70 billion. Health and social affairs sectors got SR31 billion while water, agriculture and infrastructure SR22.5 billion.
Special allocations have also been made to increase the capacity of educational institutions and expand employment opportunities for young Saudi men and women in the job market.
The 2006 national budget includes allocations for the construction of three new universities in Jizan, Hail and Al-Jouf, 2,700 new schools, three new technical colleges and 15 vocational training centers.
“The existing universities will be supported by establishing 85 new colleges,” the Saudi Press Agency quoted the king as saying.
Three new university hospitals will be established while the existing university hospitals will be upgraded.
The budget includes establishing and furnishing of 440 primary health care centers in all the 13 regions of the Kingdom. Allocations have been made for 24 new hospitals, and for the furnishing, expansion and development of existing health facilities.
King Abdullah urged ministers and other officials to speed up implementation of the projects mentioned in the budget to boost development and prosperity of the Kingdom and its citizens.
“We have to be very quick. We have got a lot of resources and what remains now is implementation. I wish all of you will carry out the projects and the budget plan as quickly as possible,” the king told the ministers.
In his statement, Finance Minister Al-Assaf said public debt would drop to around SR475 billion, which is estimated to be 41 percent of GDP by the end of the current Saudi fiscal year. He said the 2006 budget has allocated SR24.8 billion for new educational and training projects, SR4.3 billion for new health projects, SR10 billion for new municipal projects, and SR9.2 billion for new roads, airports, seaports, railroads and postal services.
New projects in water, agriculture, and infrastructure will get SR18 billion. These include water, sewage, and desalination projects worth SR13 billion.
“Allocations have also been made for two industrial cities — Jubail-2 and Yanbu-2,” Al-Assaf pointed out.
The financial resources of lending institutions such as Saudi Credit Bank, the Real Estate Development Fund and Saudi Industrial Development Fund have been increased to enable them to expand their lending programs.
These specialized development institutions as well as the Public Investment Fund and the Agricultural Bank will continue to provide credits to projects and services in the areas of industry, agriculture, and major infrastructure projects. These institutions approved loans worth SR22.5 billion in 2005.
“The new budget includes appropriations for the special lending programs for private universities, colleges, and schools,” Al-Assaf said. In 2005, SR300 million of loans were approved in this sector.
Al-Assaf emphasized the private sector’s participation in development projects.
“The total number of government contracts signed with the private sector in 2005 amounted to 2,900 contracts with a value of around SR40 billion,” he said.
According to a statement issued by the Finance Ministry, the non-oil industrial sector is estimated to grow by 8.4 percent; the construction sector by six percent; the electricity, gas, and water sector by 4.9 percent; the transport and communications sector by 9.9 percent; and the wholesale, retail, restaurants, and hotels by 6.2 percent.
Inflation, as measured by the cost of living index, is estimated to have increased by 0.4 percent in 2005, while the non-oil GDP deflator has shown an increase of 1.14 percent, the Finance Ministry said.
According to preliminary data issued by the Saudi Arabian Monetary Agency, the trade balance is projected to achieve a record surplus of SR460.3 billion in 2005 compared to SR317.3 billion in 2004, an increase of 45.1 percent.
Non-oil exports are projected to grow by 20.6 percent in 2005 totaling SR69 billion, representing 10.5 percent of total goods exported.
In addition, current account is projected to record a surplus amounting to SR326.5 billion in 2005 compared to SR194.7 billion in 2004, an increase of 67.7 percent.
The Kingdom’s fiscal and monetary policies continued to aim at price and exchange rate stability, the ministry said. The broad money supply during the first 10 months of 2005 grew by 9.2 percent compared to 9.6 percent in the same period of the pervious year.
Bank deposits recorded a growth of nine percent during the first 10 months of 2005. Total bank claims on the public and private sector increased by 18.1 percent while their capital and reserves increased by 23.4 percent, reaching SR64.5 billion.
Al-Assaf said the government would continue to pursue appropriate structural policies and initiatives with the aim of enhancing business environment.
The Capital Market Authority will continue to regulate and monitor the capital market with the objective of enhancing efficiency and transparency in securities transactions. In this regard, CMA issued the necessary by-laws required to implement the capital market law. In addition, CMA licensed seven consultancy and portfolio management companies.
