Economists say Al-Assaf drew up the 2002 budget based on a Saudi oil price of about $16 a barrel and production of 7.2 million barrels a day (b/d). But in the first eight months of the year, production averaged 7.4 million b/d, a level that is projected to keep rising until the end of the year. More importantly, the price has been far higher than expected. The OPEC crude basket price, which is slightly more expensive than the Saudi export price, averaged $23.58 a barrel in the first nine months of 2002 – an average that is expected to rise in the fourth quarter of the year.

Revenues were forecast at SR 157,000 million and spending at SR 202,000 million, resulting in a budgeted deficit of SR 45,000 million.

However, since the firmer oil price began to look more permanent this summer, analysts have been rapidly reworking their forecasts. Jeddah-based The National Commercial Banknow forecasts a small surplus of SR 2,000 million, based on revenues of SR 208,000 million and spending of SR 206,000 million.

In 2001, actual spending soared over budget, raising concerns over fiscal performance. But those figures were inflated by one-off payments, possibly for defence contracts. Economists in the kingdom say there is no evidence yet to show significant overspending by the government in 2002.

Exchange rate: $1=SR 3.75