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Saudi Arabia due to overspend budget by 15 per cent in 2011 Kingdom feels the economic burden of its pledged construction and job-creation measures aimed at warding off popular unrest
Saudi Arabia will overspend its budget by up to 15 per cent in 2011 due to spending on construction and job-creation measures, the Kingdom's finance minister said on Tuesday. Worried by unrest sweeping the Arab world, Saudi Arabia has pledged to spend an estimated US$130 billion -- around 30 per cent of its annual economic output -- on new housing, job creation, unemployment benefits and other measures. The OPEC member, which relies on hydrocarbons for around 85 per cent of budget revenue, has not said how the expenditure will be spread. "Because of decrees issued by the custodian of two holy mosques, it [spending] will be over [plan]," Finance Minister Ibrahim Alassaf told reporters at a financial conference. "We will have overspending. I cannot project exactly but I would think, although it is very difficult ... it (overspending) will be 10 to 15 per cent," Alassaf said. He reiterated an earlier forecast that Saudi economic growth this year would exceed 4 per cent, up from 3.8 per cent growth last year. The biggest Arab economy, which tends to heavily overspend when oil prices are higher, had originally planned to spend SAR580 billion in 2011 in its third consecutive record budget. Robust oil prices near $98 per barrel should enable Saudi Arabia to cover the additional spending without having to tap into its record high net foreign asset reserves of $461bn and could generate a budget surplus in 2011. "We might not need to [use foreign reserves]," Alassaf said, adding it was premature to assess the need as it was still early into the year. "We are confident that the current resources will be enough to meet needs [for project financing] due to high oil prices, which is the base of the budget." Alassaf did not say what the assumed oil price in the Saudi budget was. When asked, he said: "The suitable price is the price that is good for the market stability."
