Saudis
spending more than it should - IMF
Saudi
Arabia's government is spending more than it should do if it wants to
preserve the country's oil wealth for future generations, the
International Monetary Fund said in a report released on Tuesday.
7
August, 2012
"While
the government has built significant policy buffers, fiscal spending
is above the level consistent with an intergenerationally equitable
drawdown of oil wealth," the Fund said in an annual assessment
of the Saudi economy.
The
IMF did not specify an appropriate level of spending, but said the
government should be flexible in providing social welfare benefits,
broaden its tax base and ensure its expenditure was efficient.
Partly
in response to unrest in the Arab world, Saudi Arabia boosted
spending to a record SR804bn ($214bn) in 2011, 39 percent more than
initially planned and 23 percent higher than in 2010, its fastest
growth in a decade.
In
May, Finance Minister Ibrahim Alassaf said there might be a bit of
extra spending this year, adding that the kingdom's fiscal position
was comfortable.
The
OPEC member, which overshot its annual budget plans by an average 23
percent in the past decade, outlined spending of SR690bn in its 2012
budget.
Due
to heavy spending, the Gulf country's dependency on oil has risen
notably. The price of crude that is needed to balance the government
budget is projected to rise to $98 per barrel by 2016 from an
estimated $80 in 2011, the IMF said in April.
However,
robust oil prices, currently above $110 per barrel , have been
helping to boost Saudi Arabia's fiscal cushion. The central bank's
net foreign assets rose to a record $591bn in June.
"We
were able in the past few years to formulate medium- range fiscal
policies," Alassaf told Al Arabiya television on Tuesday when
asked to comment on the latest IMF report.
"And
the reason is because we built suitable reserves, especially
investments that allow us to implement fiscal policies even if the
oil prices fluctuate as we have witnessed in the past," he said.
Other
parts of the report praised Saudi Arabia's economic policies,
including its help to stabilise global oil markets in 2011 and
commitment to provide $15 billion of additional resources to the IMF.
The
Fund said the kingdom's near-term economic outlook was broadly
favourable, keeping its 2012 growth forecast at 6 percent. Adverse
spillovers from unrest in the region and the euro area crisis have
been limited so far, it added.
The
IMF also underlined the need to prevent any inflation pressures
caused by robust growth through a proactive use of liquidity and
macroprudential policy tools, raising its 2012 forecast to 5.2
percent from 4.8 percent seen in April.
Saudi
annual inflation slipped to 4.9 percent in June, its lowest level
since August 2011.
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