Saudi Arabia breaches SR 250 billion mark in oil revenue 

Saudi Arabia netted one of its highest incomes in 2003 since the end of the oil boom 20 years ago. The incomes allowed it to boost its official assets by nearly $20 billion.

A press report said that from SR197.9 billion ($52.7 billion) at the end of 2002, the assets of Saudi Arabian Monetary Agency (Sama) leapt to SR272.7 billion ($72.7 billion) at the end of 2003, according to the central bank.

The bulk of the increase was in its investment in foreign securities, which more than doubled to around SR97 billion ($25.8 billion) from SR43.7 billion ($11.8 billion).

Deposits with banks abroad rose modestly to SR45.7 billion ($12.1 billion) from SR 40.2 billion ($10.7 billion) in the same period, added the report.

Saudi bankers said the sharp increase in foreign securities was the result of a government decision to switch to bonds and away from bank deposits because of low interest rates, the report added.

The report said quoting a Jeddah banker: "Sama's assets at the end of 2003 are the highest in more than 10 years and one of their highest levels since the end of the oil boom. The sharp growth was a result of a surge in crude prices last year."

Prices of North Sea Brent Crude shot above $28 in 2003 to lift Saudi Arabia's oil export earnings to nearly $75 billion, an increase of around $20 billion over the previous year.

The report added that the increase allowed the Kingdom, which controls nearly a quarter of the world's proven oil wealth, to turn a projected budget deficit into a surplus for the second year since 1981 after the $6 billion positive balance in 2000, when oil prices were as high as $27.5.

By the end of September, Saudi Arabia's official reserves with the International Monetary Fund, excluding gold, hit their highest level in 22 years of around $23.1 billion.

The reserves were more than triple the $7 billion at the end of 1998, when crude prices tumbled below $10 due to an oil production and price war. Economists expect the surge in income to have reversed an upward trend in the kingdom's public debt that has swelled to above 650 billion riyals ($173 billion) by the end of 2002 because of persistent government borrowing to finance the budget shortfall.

According to the press report Saeed Al Shaikh, chief economist at the Saudi National Commercial Bank (NCB) said, expectations are that the public debt should have been reduced at the end of last year. That's what the government has also announced."

In a report on the Saudi economy, NCB said the GDP leapt by nearly 12 per cent last year but was expected to climb down this year due to lower prices and output. "Our expectations are that the Saudi private sector will grow in 2004 but the oil and the government sectors will shrink due to lower output and prices. This means the GDP will likely contract this year although some consider the 2004 budget as an expansionary one. The sharp growth in the GDP last year was exceptional as it was caused by high oil prices and production."

Saudi Arabia produced as high as 8.8 million barrels per day in 2003 while its output is projected to decline to nearly 7.9 million bpd this year due to Opec restraints, said the report.