Saudi Arabia has more than doubled its capital spending on development projects in the first quarter as it sought to spur the non-oil sector. The government awarded contracts valued at SR40.6 billion ($11 billion), up from SR20 billion in the same period last year, Finance Minister Ibrahim Al-Assaf said at Euromoney Saudi Arabia Conference. Overall, the 2009 budget forecast a 36 percent increase in investment spending, he said. “The current expansion of investment expenditure which covers infrastructure, public services, education and health sectors will provide great trade and investment opportunities for the private sector,” Al-Assaf said. “We are optimistic about the future of the Saudi economy,” Al-Assaf said. “We are embarking on a policy of expanding spending and investments so as to create opportunities for the private sector.” Around 1,300 leading economists, bankers and investors from over 30 countries are participating in the event. The net financing provided by the government's specialized credit institutions amounted to around SR20 billion compared to around SR9.5 billion in 2007, a growth of around 110 percent, Al-Assaf said. The Saudi Arabian Monetary Agency has been drawing on its reserves with foreign banks to fund a $400 billion government spending program to boost the economy hit by low oil prices. The agency has also cut interest rates six times since Oct. 12 to stimulate growth in the world's largest oil exporter. Al-Assaf's comments demonstrate Saudi Arabia's commitment to raise spending to maintain growth in the economy, John Sfakianakis, chief economist at Riyadh-based Saudi British Bank, said. “Saudi Arabia is spending money aggressively and will continue to do so.” Mohammad Al-Jasser, Governor of SAMA, said at the conference that the priority is to help the economy overcome the crisis, not inflation, and therefore the government will allow itself to run deficits “in the medium term.” “Our economy is still exposed to the vagaries of the oil market so that our growth is much more volatile than in the advanced economies, which are highly diversified,” he said. “We are now in a deflationary environment and priorities are different,” Al-Jasser said. “The government is projecting a budget deficit as a cushion against any slowdown in the private sector.”
