DUBAI: Saudi Arabia's government spending is likely to increase at a more moderate pace in coming years, Finance Minister Ibrahim Al-Assaf said yesterday.
Speaking to reporters at a meeting of Arab finance ministers and central bankers in Dubai, Al-Assaf said he was confident that his government could maintain current levels of spending in the medium term even if oil prices fell.
But future annual spending increases are likely to be in the high single digits, lower than in recent years, he said at a meeting of Arab finance ministers and central bankers in Dubai. "I expect fiscal spending to increase at more moderate rates than in the past because we have been putting a lot of resources into investment, and we will reach a stage when we expect expenditure to grow at a rate that's not as high as it has been in the last few years," Al-Assaf said.
"I cannot pin down what's the rate, but I would imagine it will be in single digits, maybe the higher side of single digits."
Saudi Arabia has boosted government spending on welfare, job creation and economic infrastructure sharply in the last several years, partly to ease social content after Arab Spring uprisings elsewhere in the region.
This year, for example, it has budgeted to spend a record SR 820 billion ($219 billion), up 19 percent from the amount originally planned for 2012.
High oil prices have allowed the kingdom to continue posting big budget surpluses, but in the long term its finances could deteriorate if oil prices fall sharply, and the International Monetary Fund has warned that the government could conceivably swing into deficit later this decade.
Al-Assaf said: "What I want to say is that over the last few years we set a number of firewalls and defense lines in case there is a decline in oil prices, which we do not expect.
"We have reduced debt to a very small percentage of our GDP (gross domestic product), we have increased our reserves so we can maintain expenditure over the medium term. We are now confident that we can maintain it over the medium term even if oil prices decline."
Reproduced with permission from Arab News