GULF-ECONOMY: GULF STATES REIN IN SPENDING TO CUT DEFICITS

• by IPS Correspondents (abu dhabi)
• Wednesday, December 28, 1994
• Inter Press Service

ABU DHABI, Dic 28 (IPS) - GULF ARAB STATES ARE SET TO TIGHTEN THEIR BELTS FOR ANOTHER FISCAL YEAR TO KEEP BUDGET DEFICITS UNDER CONTROL AS OIL OUTPUT REMAINS UNCHANGED AND A MAJOR INCREASE IN THE CURRENT LOW PRICES APPEARS UNLIKELY.

LOW OIL PRICES HAVE FORCED SAUDI ARABIA, QATAR, OMAN, BAHRAIN, THE UNITED ARAB EMIRATES (UAE) AND KUWAIT -- THE SIX MEMBERS OF THE GULF COOPERATION COUNCIL (GCC) -- TO SLASH EXPENDITURE IN 1994, CUTTING THEIR PROJECTED BUDGET DEFICIT TO AROUND NINE BILLION DOLLARS FROM 14.6 BILLION DOLLARS IN 1992.

WGSAUDI ARABIA, THE WORLD'S TOP OIL PRODUCER AND EXPORTER, ANNOUNCED LAST WEEK IT WOULD SLASH ITS 1995 SPENDING BY 20 PERCENT WHICH COULD SEE EXPENDITURE HIT A RECORD LOW OF AROUND 34 BILLION DOLLARS.

THIS FOLLOWS A SIMILAR CUT IN 1994 WHICH BROUGHT EXPENDITURE DOWN TO 42 BILLION DOLLARS FROM 52.5 BILLION DOLLARS IN 1993.

SAUDI ARABIA PAID MORE THAN 50 BILLION DOLLARS TO THE U.S.- LED COALITION THAT OUSTED IRAQI FORCES FROM KUWAIT IN FEBRUARY 1991. THE PAYMENTS, COUPLED WITH LOW OIL PRICES AND UNCHANGED SAUDI OUTPUT, SHARPLY PUSHED UP THE BUDGET DEFICIT.

APART FROM PERSISTENT BUDGET SHORTFALLS, LOW OIL PRICES HAVE CREATED DEFICITS IN SAUDI ARABIA'S BALANCE OF PAYMENTS AND TURNED IT FROM A CREDITOR INTO A DEBTOR COUNTRY. ITS INVESTMENTS OF OVER 120 BILLION DOLLARS HAVE ALSO BEEN SAPPED BY WITHDRAWALS.

REGIONAL ECONOMISTS SAY THAT WITH A PRODUCTION OF EIGHT MILLION BARRELS PER DAY (BPD) AND AN ASSUMED MINIMUM OIL PRICE OF 15 DOLLARS IN 1995, ITS REVENUES COULD STILL BE ABOVE 43 BILLION DOLLARS, CREATING A BUDGET SURPLUS OF NEARLY NINE BILLION DOLLARS FOR THE FIRST TIME SINCE OIL PRICES BEGAN TO CLIMB DOWN IN THE MID 1980S.

KUWAIT WAS THE ONLY GCC MEMBER TO BOOST SPENDING IN 1994, BUT THAT WAS DUE TO ITS POST-WAR COMMITMENTS. EXPENDITURE FOR 1994-95 WAS RAISED TO 13.8 BILLION DOLLARS FROM 8.8 BILLION DOLLARS IN 1993-94 FOR THE SAME REASONS.

"FROM STATEMENTS BY KUWAITI OFFICIALS, WE SEE A TREND FOR TIGHTER FINANCIAL POLICIES IN THE COMING YEARS TO TRIM THE DEFICIT," SAID A BANK MANAGER FROM THE STATE.

BAHRAIN, A MINOR OIL PRODUCER, ALSO ANNOUNCED SLIGHTLY HIGHER SPENDING IN ITS 1995 BUDGET DUE TO ITS RELIANCE ON AID FROM SAUDI ARABIA.

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