Revenues have risen because oil production and prices have both been higher than were budgeted. Combined with an expected decline in expenditure, due to abnormally large spending in 2001, there is now a strong chance that the government could balance the budget in 2002.

'Chances are, there will be a balanced budget - or even a small surplus,' says Said al-Sheikh, chief economist at Jeddah-based The National Commercial Bank. 'I forecast government revenues this year of SR 208,000 million [$55,500 million], based on the improved oil market, and expenditure of SR 206,000 million [$54,900 million].'

Al-Assaf also said that the government would use the proceeds of selling shares in local and foreign companies to service its debts to public institutions - primarily the state-run pension funds. He said this would be done both by swapping shares for some of the debt held by the institutions and by directly selling shares to the kingdom's private sector. He said that shares in neither Saudi Electricity Companynor Saudi Basic Industries Corporation (Sabic)would be included in the next tranche of share sales.

Economists have welcomed the news. 'There are two positive developments on the debt side,' says Al-Sheikh. 'On the one hand, reducing the debt-to-GDP [gross domestic product] ratio is attractive to investors. On the other, by releasing shares to both public institutions and private investors, the speculative trading now rife in the market can be diminished without actually destabilising it.'

Public debt at the end of 2001 stood at about SR 630,000 million ($168,000 million), of which about 20 per cent is held by local banks, about 75 per cent is held by the pension funds, and the remainder by private companies and individuals. GDP in 2001 was SR 638,000 million ($170,100 million).

The government has seven foreign joint ventures. It has two in Egypt and one each in Morocco, Tunisia, Pakistan, Bangladesh and Syria. The total value of these shares is roughly $380 million, of which the government holds exactly half.