Education, education, education

Saudi Arabia appeared to go for jobs and growth in its 2004 budget, released in mid December, allocating around SR63.65 billion ($16.97 billion) to education.

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By  David Ingham Published  January 1, 2004

Saudi Arabia appeared to go for jobs and growth in its 2004 budget, released in mid December. Projecting revenue at SR200 billion (US $53.3 billion) and expenditure at SR230 billion ($61.3 billion), the government said it would allocate around SR63.65 billion ($16.97 billion) to general education, higher education and manpower training. That will include the construction of 3,030 new schools and three new universities in Madinah, Qasim and Taif, bringing the number of universities in Saudi Arabia to 11. The government said it will also invest heavily in creating a more professional military training programme. Elsewhere, around SR42 billion is being put into what the government describes as ‘new projects’, which include the construction of 150 primary health care centres, the refurbishment and expansion of existing hospitals and the improvement of water, sewage and transportation infrastructure. “Priority will be given to expenditures on the services that directly deal with citizens such as health, education, social affairs, municipal services, water, drainage, roads, and some projects of infrastructure to promote and attract investment to increase the country’s economic growth,” the government said in its budget statement. Dr Said Al Shaikh, chief economist at National Commercial Bank, views the plan to increase infrastructure spending positively. “The average capital expenditure of the last few years has been around SR27-28 billion on a yearly basis. They put nearly SR42 billion worth of capital into development expenditure,” he explains. “I think that would have a positive economic implication, in the short term as well as in the long term. The pickup in construction activities will generate demand for goods and services in other related sectors, such as aluminium, steel, cement, carpentry.” The 2004 budget continues Saudi Arabia’s long tradition of budgeting for a deficit. Revenue for 2004 is projected at SR200 billion ($53.3 billion) and expenditure at SR230 billion ($61.3 billion) in 2004. The country, however, rarely sticks to its budget estimates and guessing how the numbers will really look come the end of the year has become almost a national pastime. In 2003, for example, Saudi Arabia originally projected revenue of SR170 billion, against spending of SR209 billion, based on an oil price of around $17 per barrel. Oil prices, however, stayed in the high 20s throughout 2003 and the Kingdom ended up spending SR250 billion against revenue of SR295 billion. That surplus of SR45 billion was only the country’s second since 1982. The government said in its budget statement that it would allocate some of that money to paying down the national debt. However, in keeping with tradition, the government didn’t state by how much the debt would be paid down, nor its current size. The last time the government even mentioned the debt was in the 2003 budget when it was pegged at $165 billion, owed mostly to domestic banks and the national pensions agency, the General Organisation of Social Insurance (GOSI). However, amidst all this talk about deficits, don’t be surprised if the country ends up breaking even or posting another surplus come the end of 2004. National Commercial Bank believes that the published numbers are based on an oil price of $21 for Brent crude and a reduction in output to 7.9 million barrels per day from 8.8 currently. “The assumption of $21 a barrel may be on the low side,” says Dr Al Shaikh. “I’m inclined to think oil prices would average $23-34 for 2004.” All in all, Dr Al Shaikh sees the 2004 budget as “rather expansionary,” and believes that it will have a positive effect on the economy, certainly in the short term. He cautions, however, against allowing the national debt to rise significantly further. “The concern… is that the servicing of the debt, which accounts for something in the range of SR30 billion, is almost equivalent to development expenditure,” says Dr Al Shaikh. “If the debt continues to rise, that would restrict government ability to finance development expenditures.”

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