RIYADH – Saudi Arabia can maintain its current high level of government spending for years to come, Finance Minister Ibrahim Al-Assaf said Tuesday. The Kingdom also wants to diversify the economy away from heavy dependence on oil, in case of a future plunge in global oil prices. Asked whether strong growth in government spending was sustainable, Al-Assaf told reporters: “We have the ... ability to continue this scale of spending.” “We have the reserves, as well as we are reducing our debt almost to zero. So we can continue in the medium term and even beyond that,” he said on the sidelines of the Arab Summit for Economic and Social Development. The world's No.1 oil exporter has set state budget expenditure of SR820 billion ($219 billion) for 2013, 19 percent higher than the amount initially budgeted for 2012. The International Monetary Fund said in September that Saudi Arabia, which has been running big budget surpluses thanks to high oil prices, is expected to see those surpluses shrink gradually in coming years and could post a small deficit as early as 2016. In October, Al-Assaf called the IMF prediction a “doomsday scenario” which he did not agree with. The Saudi government spending has been rising by 12 percent on average in 2002-2012. As a result, the oil price it needs to balance the budget is expected to shoot up to $85.2 per barrel in 2013 from as low as $37.6 in 2008, the IMF said in October. However, the Kingdom has a substantial buffer that would allow it to keep spending even if crude prices were to fall in the future. Its net foreign assets in the central bank, where it stores receipts from oil sales, rose to a record SR2.4 trillion in November. Oil prices rebounded Tuesday, as a weaker dollar boosted demand and in the wake of upbeat German economic data, analysts said. Brent North Sea crude for delivery in March gained 65 cents to $112.36 a barrel in London midday deals. New York's main contract, light sweet crude for February, edged up six cents to $95.62 a barrel. Crude prices had fallen on Monday as investors banked profits following gains last week driven by encouraging economic data from the United States and China, and the hostage killings in oil and gas producer Algeria, traders said. “Brent oil rebounded Tuesday... supported by weaker US dollar and robust German economic data that boosted investors' confidence,” said Sucden brokers analyst Myrto Sokou. A survey published Tuesday showed that German investor sentiment has struck the highest levels since the start of the eurozone debt crisis in 2010 as the outlook for Europe's top economy continues to brighten. — Agencies
