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Tue 23 Dec 2014 11:46 AM

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Saudi 2015 budget expected to raise spending marginally - report

Spending is expected to be about $229bn, a 0.58% rise on the 2014 budget plan

Saudi 2015 budget expected to raise spending marginally - report

Saudi Arabia's 2015 state budget is expected to
raise spending marginally from this year's original plan while covering a
deficit due to sliding oil prices with the kingdom's huge fiscal reserves, a
Saudi newspaper reported on Tuesday.

Quoting unnamed sources, the Al-Madina newspaper
said government spending was expected to be about 860 billion riyals ($229
billion), up from a record 855 billion riyals in the 2014 budget plan.

Projected 2015 revenues would drop to 715 billion
riyals from 855 billion riyals in the 2014 plan, leaving a deficit of 145
billion riyals.

Saudi Arabia will continue spending actively on
major strategic projects such as housing, transport and the construction of
industrial cities, the newspaper said.

The budget, which is expected to be announced later
this week after a special cabinet meeting, is eagerly awaited by financial
markets because it will be the first detailed look at how Saudi Arabia intends
to handle the economic impact of this year's oil price plunge.

Finance Minister Ibrahim Alassaf said last
Wednesday that his government would continue spending strongly on development
projects and social benefits in the 2015 budget, but he did not give details.

If the figures in the Al-Madina report are correct,
they suggest Saudi authorities are confident of their ability to ride out a
period of low oil prices and see no need to slash spending or impose harsh
austerity policies.

Some analysts believe Riyadh is content to see oil
prices fall as a way to squeeze out competing producers in non-OPEC nations;
the reported budget figures imply it could pursue this strategy for years if it
feels that is necessary.

A 145 billion riyal budget deficit, the kingdom's
first since the global financial crisis in 2009, would be about 4.8 percent of
Saudi Arabia's projected gross domestic product next year, according to
estimates by the International Monetary Fund.

Government reserves at the central bank totalled
905 billion riyals at the end of October, enough to cover such a deficit for
about six years. That excludes the government's other assets and its ability to

The newspaper report did not specify the average
oil price on which the budget projections were based. Brent crude has slumped
to just above $60 a barrel from around $115 in June.

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