MUSCAT: The Kingdom expects a slump in crude prices to last for about a year. Finance Minister Ibrahim Al-Assaf said the decline in the price of oil will not hit the government’s development plans.
“What is expected is that what markets, oil and other, are going through is a temporary phase which could last one year, a little less or a little more,” Al-Assaf said yesterday on the sidelines of a meeting of Gulf Cooperation Council (GCC) finance ministers in the Omani capital.
Oil is currently hovering around $50 a barrel, down from a record of more than $147 in July, raising concerns about economic and corporate profit growth in 2009.
“I project public spending in 2009 to be higher than in 2008,” he said. “There will definitely not be any impact from the oil price decline on the government’s development program,” he added.
The slump in the price of oil had proven the effectiveness of the Kingdom’s policy of maintaining sufficient reserves to make its development projects immune to revenue fluctuations, said Al-Assaf.
“It was said that our reserves were too high, but the current experience shows that the size of these reserves is adequate to enable us to continue in our development programs even with lower oil prices,” he said. Earlier this month, Custodian of the Two Holy Mosques King Abdullah told leaders at the G-20 meeting in Washington that he expected “investment by the public and the state-controlled oil sector to exceed $400 billion over the next five years.”
Al-Assaf outlined how the Kingdom would allocate the funds. “About half of the $400 billion will be budgeted over the next five years. About a quarter has already been budgeted but has yet to be deployed and a quarter will go to the oil sector. To mitigate the impact of the crisis, we are examining new measures that should provide necessary financing for planned projects,” he said.
Meanwhile, the GCC states are considering setting up a joint company to build a railway costing more than $14 billion. According to a study being discussed by finance ministers, the 1,940 km railway would connect Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, each of which would contribute a share of the start-up capital.
“It is proposed that the ownership and funding of the GCC railway be through a jointly-owned railway company,” said the study. “The contribution of each member state to the overall project would be represented through their shareholding in the company.”