Saudi Gov't Won't Shrink Investments Amid Lower Oil Prices
MUSCAT, Oman(Dow Jones Newswires), November 25, 2008
Saudi Arabia's government won't reduce spending even if crude oil prices fall below what it had budgeted for in 2009, the kingdom's Finance Minister Ibrahim Abdulaziz Al-Assaf said Tuesday.
"Even if the oil price is lower, we are not going to shrink our investment program or expenditure," Al Assaf told Zawya Dow Jones in an exclusive interview,
"If oil reserves are less than what would cover the total budget then we will resort to our reserves," Al Assaf, who is attending a meeting of Gulf Cooperation Council states' finance and economy ministers in Oman's capital Muscat, said.
Instead the kingdom would increase spending as cost for raw materials are dropping, he said.
"Investent expenditure will not be scaled back but increased because we want to take advantage of the lower costs now," Al Assaf said.
He added that Saudi Arabia had also accumulated sufficient reserves that it could tap into easily for the next three to five years.
"Even if we run out of reserves, over the last few years we have covered most of our debt, now it's only 20% of GDP, so now we have more reserves," Al Assaf said.
When asked how the stronger dollar was affecting government finances, Al Assaf said as the riyal is pegged to the dollar it had no major impact but it had led to a decline of product costs from non-dollar regions.
"The cost of goods and services from non-dollar areas are now cheaper, which is better for us. We do most of our trade with the EU as a region but in specific countries we do most trade with the U.S. so the stronger dollar is helping, but not that much," he said.
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