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Mon 28 Mar 2011 11:21 AM

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Social spending spree may push Saudi inflation up

King Abdullah has unveiled $130bn spending plan in bid to sidestep political unrest

Social spending spree may push Saudi inflation up
King Abdullah has unveiled a $130bn spending plan in bid to sidestep political unrest

Saudi Arabia may see inflation from massive social spending
packages announced over the past month, the kingdom's finance minister said.

Ibrahim al-Assaf said,
however, that he hoped any impact would be muted from any spending. Saudi
Arabia's elderly King Abdullah announced last week $93bn in social handouts, on
top of another $37bn announced less than a month earlier, as popular protests
sweep across the region.

"Any increase in
spending could have an impact on inflation," Ibrahim al-Assaf said.
"But if there is any impact we hope it is temporary and limited."

Saudi annual inflation slowed
to a 10-month low of 4.9 percent in February, with growth in housing and
transport costs subsiding, though analysts said the slowdown was temporary due
to robust global food prices and crude above $100 per barrel.

Asked about funding for the
spending programme, Assaf said: "The funding will come from the
budget."

Assaf said earlier in March
the kingdom's economy is in "excellent" shape and a rise in oil
prices will boost the strong economic and financial position of the world's top
oil exporter.

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