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Volume :21 Issue : 82 1996      Add To Cart                                                                    Download

CURRENT AND FUTURE TRENDS OF SAUDI BUDGET DEFICIT ( 1973 – 1992 )

Auther : By: Dr. Fareed B. Taher and Dr. Mohammad S. Gabel

Oil returns are the major of revenues to the Saudi budget, it represents 60% to 70% of government total revenues. Upon the sharp rise of oil prices in the early seventies, the Saudi government committed itself to a series of ambitious and highly expensive economic development plans. By the early eighties world oil prices started its downward trend causing Saudi budget revenues to fall short of its expenditure commitments. Saudi budget used to enjoy substantial surpluses in the past decades. Saudi budget experienced deficit for the first time in the years 1977-1987, however, starting 1982 the budget deficit became a permanent economic problem.

The deficit is financed mainly from the Kingdom’s international reserves. However, as a result of the drop of oil returns in the eighties, Saudi government choose the sale of government bonds to the public as a supplement mean of financing its growing budget deficit.

This study was able to forecast the deficit trends through the coming five years (1996 – 2000) of the sixth development plan. The study expects the deficit to persist throughout this period, yet with a moderate size of 18% of the total budget expenditure. Therefore, the authors suggest that more efforts should be aimed at increasing government revenues through the liberalization of oil world trade, a tax reform that would yield adequate revenues, a gradual reduction of all types of government subsidies and a smaller government sector through privatization.

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