With the Finance Ministry forecasting revenues of $125.3bn and expenditures of $144bn for the year ahead, the government is expecting to run a second consecutive budget deficit, of $18.6bn, in the fiscal year 2010.

But this year’s budget is based on an oil price of $44 a barrel – which appears conservative, given that oil prices have been hovering just below $80 a barrel since October last year. High oil prices also meant that last year’s deficit was $4bn less than the $17bn predicted. If the trend persists in 2010, the kingdom will end the financial year in good health.

While the state’s finances may be in relatively strong shape, the private sector is still recovering from the effects of the debt crises at the Saad and Al-Gosaibi groups.

International banks are now reticent to lend to Saudi family businesses on the basis of reputation – a sign that lending practices in the kingdom will tighten this year. More robust credit checks may be painful in the short term, but phasing out the practice of name-lending will be for the long-term benefit of Saudi Arabia’s private sector.