Al-Jubeir: Kingdom’s financial deficit this year is ‘manageable’
Saudi Arabia’s financial deficit this year is manageable despite the low oil prices, and the Kingdom’s economic growth rate and financial health will stay strong, Foreign Minister Adel Al-Jubeir said at a security conference in Bahrain.
“The deficits that the Kingdom will be running this year are manageable,” he said.
On Friday, Standard & Poors cut its ratings for Saudi Arabia’s long-term foreign and local currency sovereign credit by one notch to ‘A-plus/A-1’, citing a “pronounced negative swing” in the government’s budget balance.
The Kingdom’s Finance Ministry described S&P’s decision as reactionary.
“We are on the tail end of a huge infrastructure development program in terms of airports, roads, hospitals, highways, housing and so forth and so there was a lot of spending,” said Al-Jubeir.
But he said that Saudi Arabia and its Gulf neighbors had over the past 12 years of very high oil prices accumulated large financial reserves and that the Kingdom’s debt to gross domestic product ratio of 12 percent was lower than any other G-20 nation.
“We have no doubt that the growth rates in our economy will continue and the financial health of the Kingdom will remain as strong as it has been,” he said.
“We have a debt to GDP ratio of somewhere around 12 percent, which is the lowest by far of all the G-20 countries,” he said.
“We have great infrastructure, very professional enterprises, attractive laws for foreign investments and we see this in how many outside investors come into the Kingdom,” said the minister.
Al-Jubeir’s remarks came during a panel discussion at the 11th Manama Dialogue in Bahrain that focused on the political, security and economic questions of the region.
The minister denied that Saudi Arabia was financially hurting after a question was posed to him regarding deficits the Kingdom is projected to incur by end of year.
He said that the country will be able to manage moving forward after an order by Custodian of the Two Holy Mosques King Salman to streamline economic processes in the country through the setting up of the Economic and Development Council in late January.
“The countries of the GCC have come to the realization long time ago that free market economies, unleashing to potential of our youths and our business communities by streamlining regulations and reducing the role of government in is the key to economic growth the – and by extension ensuring the prosperity of stability and security,” the minister said.
The council, he said, was first initiated after King Salman’s ascension to the throne and was mainly put in place to look up new investment areas, managing the kingdom’s financial reserves and making up spending decisions more transparent.
“All these areas are going to be doing two things: on the one hand, reducing spending by reducing the costs that the government bares,” said Al-Jubeir.
“All of these changes were being fought through even before the collapse of oil (prices). It’s the right thing to do.”
When asked how the economic deficits this year will hurt Saudi Arabia’s defense and foreign affairs strategies, he said: “Very little.”
“This is because defense is one of the most essential functions of the government. We are facing many challenges and we have to ensure that we are capable of confronting those challenges.”