Monday, Dec 18, 2006


(Updates item published at 15:22 GMT with comments from Minister of Finance)

RIYADH (Zawya Dow Jones)--Saudi Arabia Monday forecast a budget surplus of 20 billion Saudi riyals ($5.3 billion) in 2007, with revenue expected at SAR400 billion and expenditures at SAR380 billion on the back of high oil prices.

Finance Ministry said on its Web site that the government will allocate SAR140 billion from the planned expenditures for new projects.

Out of this, SAR96.7 billion will be set aside for educational projects, SAR39.5 billion for health care and social development projects, SAR15.5 billion for municipal projects, SAR16.3 billion for the telecommunication projects, and SAR24.8 billion for water and basic infrastructure, the ministry said.

The budget for 2007 also allocated SAR20 billion from the surplus to raise the capital of Public Investment Fund.

The kingdom also announced a SAR265 billion budget surplus for 2006, putting revenues at SAR655 billion, or SAR265 billion above its previous forecast, and expenditure at SAR390 billion, or SAR55 billion above expectation.

The Saudi Government will add SAR100 billion from the 2006's surplus to the public reserves.

Based on the figures announced Monday, the country will earmark SAR94 billion to payoff some of its public debts, which is expected to reach SAR366 billion by the end of 2006, or 28% of the GDP, from SAR460 billion in 2005.

Minister of Finance Ibrahim Al-Assaf said that the Kingdom's GDP is expected to increase 12.4% in 2006 to SAR1.3 trillion, the state-run news agency reported.

With the improvement in its fiscal position over the last four years, the government has substantially reduced its public debt. This, coupled with the strong GDP growth, brought down the ratio of public debt to GDP to 28% in 2006 from 40% in 2005.

Saudi GDP at constant prices grew 4.2% in 2006, with increase of the public sector at 6.1%, and private sector 6.3%, Al-Assaf has said.

Saudi Arabia, the world's largest oil exporter, didn't specify the oil prices on which revenues had been calculated for 2007. Usually the government calculates oil revenues on a conservative estimate of the average price during the year.

"The oil market will be a little softer in 2007, with a lower average price and production level for Saudi Arabia," said Brad Bourland, chief economist at Samba Financial Group.

Saeed Al-Shaikh, chief economist at National Commercial Bank, said Saudi crude is estimated to have averaged $61 in 2006, and it will average $55 in 2007.

-By Anees Al Qudaihi, Dow Jones Newswires, +966 1 2914872, anees.alqudaihi@dowjones.com

(END) Dow Jones Newswires

18-12-06 1644GMT