Expenditures are growing at a healthy pace with no increase in debt.

Expenditure allocations were raised almost 19 percent from 2011 levels to SR690 billion ($184 billion). These measures would spur solid economic growth and encourage greater private sector participation.

This year's non-oil private growth is a testament of the sector's impressive results.

The 2012 budget places relentless emphasis once again on infrastructure and social spending, with education and training accounting for more than 24 percent of the total allocation.

While the budget demonstrates the state's willingness to continue steering the economic recovery, it also makes enough effort to diversify and involve the private sector as the main engine of growth along with high government expenditure.

The high oil price environment in 2011 enabled Saudi Arabia to post a very comfortable budget surplus of SR306 billion ($81.6 billion) this year.

Actual public revenues rose to 105.5 percent from 2011 to SR1.110 trillion ($296 billion), while expenditures climbed 38.6 percent to SR804 billion ($214.4 billion).

Elevated state spending has played an essential part in maintaining confidence in the economy as the government seeks to involve the private sector into the development process.

High spending is justified given the needs of the country without jeopardizing the fiscal considerations of the country. Saudi Arabia has the luxury for the time being and for the medium term to keep on spending responsibly without any fiscal risks. Not only did Saudi Arabia spent more but it also saved more than previous years, thanks to record high oil revenues.

Higher saving was reflected higher foreign assets reaching SR1.99 trillion ($531.5 billion) in October 2011. 

Saudi Arabia can afford to spend more and apply counter cyclical policies without deficit financing. How many countries/economies can afford to spend more and reduce their public debt at the same time? Saudi Arabia is among a few countries within the G20 which can afford to spend and reduce its debt.

I don't see any serious fiscal challenges looming due to high spending for now and when oil revenues dip, the record shows that Saudi Arabia can tap into its liquid foreign reserves without cutting spending which is crucial for the country's sustainable development and growth.

The 2012 budget demonstrates that the Kingdom is dedicated to continuing stimulatory spending to develop the economy and persuade private investors to do the same as they gradually emerge from a phase of de-leveraging. Eventually a slowdown in the pace of budget growth, however, should signal the state's goal to rein in overspending and employ more prudent fiscal policies in the longer term. This is a challenge, which will be appropriately dealt with contrary to some concerns.

The private sector is showing signs of a healthy comeback, assisted by the government's commitment to invest and a solid pick up in bank credit growth. If the Saudi economic story is contrasted against the recessionary trends in many developed economies, of rising debt and spending cuts and other pro-cyclical policies with negative repercussions, then Saudi Arabia has performed soundly and confidently in 2011.