By Joanne Bladd
Credit crisis well and truly here as the kingdom sees budget deficit of $17.3bn in 2009.
Any pretence that the middle east is immune to the world's credit crisis evaporated last week following Saudi Arabia's announcement that it expects to post a budget deficit of $17.3bn in 2009 - its first in more than five years.
Word from the Kingdom's ministry of finance that government expenditures were budgeted at $126.6bn for fiscal year 2009, while total revenues sit at $109.31bn, is hard proof - were it needed - the world's largest oil baron is feeling the chill of falling barrel prices.
For critics of the Kingdom's mega-projects, the news adds fuel to speculation that the liquidity freeze could restrict Saudi's sprawling growth plans.
Flush with oil revenue in recent years, the Kingdom has diligently smoothed the path for foreign investment through widespread expansion in infrastructure.
As with Dubai, the scale of the plans, anchored in the promise of foreign finance, were met with questions over their long-term viability. And to a degree, it seems the detractors were right.
With foreign investors now a rare breed, a string of Saudi's infrastructure plans have been left wide open to the slowdown. Adding salt to the wound are falling oil prices and a shift to a more conservative attitude among Saudi businesses, the impact of which is starting to show.
Progress on King Abdullah Economic City, the $27bn jewel in the crown of Saudi's 10x10 plan, has already fallen behind schedule while its developer, Emaar, searches for financing.
That the project, a key component in Saudi's bid for a diversified economy, is struggling to attract private investment, is a sign to many that Saudi's star is on the wane, and must raise serious questions over the viability of the remaining five economic cities.
But rumours of Saudi Arabia's slowdown are premature. Simply, its projects are too big for the government to allow them to fail. In contrast to the debt-to-asset ratio crippling certain Western governments, Saudi holds an estimated $433bn in net foreign assets, and a $157bn budget surplus - a late "liquidity gift" from the days of $147 a barrel prices.
It's hardly overleveraged. And the ministry of finance has been quick to state that large-scale projects "that ensure sustainable development... [and] more employment opportunities" will be first in the queue for supplementary funding.
The fast-tracking on Riyadh's King Abdullah Financial District and the announcement by Modon, the government's industrial development arm, of the launch of a further four industrial cities is evidence of this. Rather than fiddling while Rome burns, Riyadh has sent a clear message it has no qualms about dipping into its reserves to cushion the immature private sector, now the credit crunch has come calling.
Appropriately for the holiday season, Saudi's government is learning that charity begins at home. Whatever the cost, the domestic wheels will keep turning because Saudi Arabia has its eyes on a bigger prize - economic diversity.
Joanne Bladd is the deputy editor of Arabian Business.