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Tue 2 Apr 2013 08:37 PM

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Saudi gov't spending growth likely to slow

Saudi finance minister Ibrahim Alassaf says remains confident on spending even if oil price slips

Saudi gov't spending growth likely to slow
Saudi Arabias Finance Minister Ibrahim Alassaf attends the meeting of the Arab Foreign Ministers on the eve of the third session of the Arab Economic, Social and Development Summit held in Riyadh. (AFP/Getty Images)

Saudi Arabia's government spending is likely to increase at a more moderate pace in coming years, Saudi finance minister Ibrahim Alassaf said on Tuesday.

Speaking to reporters at a meeting of Arab finance ministers and central bankers in Dubai, Alassaf 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," Alassaf 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 SR820bn ($219bn), 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.

Alassaf said: "What I want to say is that over the last few years we set a number of firewalls and defence 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."

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