SAUDI Arabia's 2009 budget, unveiled this week in the midst of a global economic meltdown, is a Keynesian economic stimulus package that bravely seeks to facilitate productivity through big government spending in the midst of a global economic meltdown. The budget is the Kingdom's biggest ever at SR475 billion, and it took many by surprise considering the prospect of low oil prices in the year ahead. Economists in the Keynesian tradition favor heavy government spending as the panacea for lean times, though those of the monetarist tradition maintain that any positive effects thereof would be short-lived, especially if such spending is primarily for make-work tasks aimed at just putting money in the pockets of the people. From the appropriations listed in the budget, it is clear that Saudi Arabia primarily aims to spend on large infrastructural capital projects in 2009: The allocation for new and existing projects is a whopping SR225 billion, nearly half of the total budget outlay. Such heavy targeted spending on new and existing projects is aimed at keeping the economy on track and preventing it from contracting in 2009. Like every other economy in the world today, the Saudi economy too needs stimulus. But instead of bailouts and band-aid patches, the Kingdom's stimulus package opts for the arguably riskier option of pushing ahead with its long-term goal of economic diversification to reduce dependence on oil revenues. In simple terms, by spending heavily on infrastructure and social services – especially education, health, social affairs, municipal services, water and sewage, and roads – the government is seeking to offset the cash crunch in the market and improve market confidence. The worry in all this is, of course, oil prices. But considering that in these especially hard times the Kingdom has opted for not only big spending but also a deficit budget – SR 65 billion – it is clear that future oil revenues are not Saudi Arabia's biggest concern, at least in the short term, and that surpulses from the boom years are intact and available. Criticism about the deficit, the first since 2002 are largely unfounded, especially since it's small. Moreover, in the dominant economic policy generally ascribed to theories of John Maynard Keynes, deficits can be very useful when an economy needs stimulus. All in all, a very well-thought-out and ambitious budget that's further enhanced by three royal decrees aimed at bringing about, for the first time, strict implementation of fiscal discipline in government. __
