Saudi Arabia 'won't cut spending'

Saudi Arabia's finance minister, Ibrahim Alassaf Saudi Arabia will feel only a limited impact from the Euro zone debt crisis and will not cut spending even if there is a fall in oil prices, the main source of revenue for the world's leading producer, Saudi officials said Tuesday.
The Saudi government boosted expenditures to a record of 804 billion riyals ($214bn) in 2011, nearly 40 percent over its initial plan, finance minister Ibrahim Alassaf said.
Revenues and spending in Saudi Arabia were higher than budgeted in the first five months of 2012, Alassaf said, speaking at a Euromoney conference in the capital Riyadh.
"We are in a very comfortable fiscal position," he said, adding that he expected inflation to ease after hitting highs earlier this year.
Saudi Arabia's annual inflation rate edged slightly lower to 5.3 pc in April, from a 14-month high of 5.4 pc in February.
The rise was mainly due to upward pressure from higher food and housing costs but inflation is far below a record high of 11.1pc hit during an oil boom in July 2008.
Economy and planning minister Muhammad al-Jasser, formerly governor of the kingdom's central bank, said later at the same event that any impact to Europe's debt crisis on Saudi Arabia would be limited, thanks to Europe's efficient use of oil and Saudi Arabia's "negligible exposure" to European banks.
"If Europe has a serious recession it will affect the whole world, but it will affect us less," al-Jasser said. "Our ability to maintain a good level of spending will be okay”, he added.
Saudi Arabia will see more sukuk, and conventional debt issuance this year, Alassaf said.
The kingdom would benefit from diversifying its large foreign currency reserves into Chinese yuan, al- Jasser said, adding the exposure of the kingdom's banks to large corporates was not a concern.
"We need more diversity in international reserve currencies. And with the Chinese economy, which is now the world's second largest, it is unnatural that their currency is not a major participant in the foreign exchange market," al-Jasser said.