This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 RIYADH 009300 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV SA OIL
SUBJECT: SAUDI BUDGET: HIGHEST RECORDED BUDGET SURPLUS IN 
SAUDI HISTORY 
 
REF: RIYADH 006566 
 
¶1. (U) Summary: The strength of the oil market, and growing 
Saudi economy, drove Saudi Arabia's 2005 budget surplus to 
its highest recorded level - 57 billion USD, and provides the 
basis for an expansive new national budget.  The largest 
portion of the budget surplus, 60 percent, is allocated to 
government debt reduction, with an additional 26 percent for 
improvements in general and higher education.   The newly 
announced 2006 budget conservatively projects a 14.6 billion 
USD surplus, with expenditures focused again on improvement 
of social infrastructure and services, especially in 
education, health and social affairs.  The focus on education 
underscores the government's continuing effort to address the 
pool of under-educated young Saudis who are susceptible to 
extremist influence.  End Summary. 
 
 
EXCEPTIONAL BUDGET SURPLUS MAKES THE SAUDI'S RECORD BOOK 
--------------------------------------------- ------- 
 
¶2. (U) Ministry of Finance reports that 2005 is the best year 
on record for Saudi government finances.  The 57 billion USD 
surplus is two times higher than the second largest surplus 
recorded in 1980.  The budget surplus is allocated to retire 
a portion of public debt, implement infrastructure projects, 
and supplement development fund resources.  The SAG utilized 
60% of the surplus to reduce government debt by 37 billion 
USD, which stands currently at 126.7 billion USD. 
 
¶3. (U) Budget Comparison Table (in billions of US dollars) 
 
      2005  2005  2005   2006 
      Proj  Actual   %Diff  Proj 
      ----  ------   -----  ---- 
Revenue     74.7   148  98.1   104 
Expenditures      74.7   90.9    21.7   89.3 
Balance        0   57      5700   14.7 
 
 
 
2006 BUDGET HIGHLIGHTS 
---------------------- 
 
¶4. (U) To further stimulate fiscal performance, and continue 
this marked improvement in the government's debt profile, the 
2006 Saudi budget, officially released on December 13, 2005, 
increases spending by 20 percent over 2005 budgeted 
expenditures.  Budget spending priority is given to education 
and healthcare, consistent with the government's policy the 
last few years.  The Ministry of Finance noted the budget 
places special emphasis on capital expenditures to enhance 
economic growth and job creation.  Even with the additional 
expenditures, SAG estimates a 2006 year end budget surplus of 
14.6 billion USD.  Leading private economists project a much 
larger surplus of 40 to 65 billion USD given the SAG's 
conservative use of 31 USD per oil barrel for its 
calculations, a 17 USD difference in the current prevailing 
price. 
 
¶5. (SBU) As in prior years, the SAG does not publish an 
allocation by line item of the majority of the budget.  The 
budget allocated by category totals 49 percent of all 
expenditures, with the remaining 51 percent designated in 
general as "Other."  The "Other" category encompasses public 
administration, defense, domestic security and other 
government spending and subsidies. This category has 
continued to increase over the past three years; 70 percent 
in 2004, 31.8 percent in 2005, and 13.3 percent for 2006. The 
lack of transparency in this majority portion of the budget 
makes it uncertain as to the exact figures spent on internal 
security, defense, as well as allocations to members of the 
royal family's upkeep. 
 
BUDGET EXPENDITURE DETAILS 
--------------------------- 
 
¶6.  (U) 2006 Budget Expenditures (in billions of US dollars) 
 
            2005  2006  Diff  %Diff 
            ----  ----  ----  ----- 
Education and Manpower Dev.   18.7  23.3  4.6   19.7 
Health and Social Dev.         7.2   8.3  1.1   13.3 
Municipal Projects             2.9   3.6  0.7   19.4 
Infrastructure Dev.            4.6   6.0  1.4   23.3 
Transportation/Communication   2.4   3.1  0.7   22.6 
Other    39.0  45.0  6.0   13.3 
 
¶7.  (U) Education and Manpower Development:  26 percent of 
the 2006 budget.  New project spending totals 6.6 billion USD 
to include 2673 new schools, rehabilitation of 2000 existing 
schools, three new universities, 85 university colleges, 3 
university hospitals, and various technical and vocational 
colleges located throughout the Kingdom, including 
impoverished regions. 
 
¶8.  (U) Health Services and Social Development:  9 percent of 
the budget.  Expenditures for new projects equal 1.14 billion 
USD to cover 440 primary care centers, 24 hospitals, 
expansion and development of existing health facilities and 
furnishing newly completed hospitals. 
 
¶9.  (U) Municipality Projects: 4 percent of budgeted 
expenditures.  The total cost of new projects is 2.67 billion 
USD, to include roads, intersections and bridges, road lights 
and cleaning-related projects. 
¶10.  (U) Water, Agriculture, and Infrastructure Development: 
7 percent of budget.  New projects, including water, sewage, 
and desalination projects, are estimated at 4.8 billion USD. 
¶11.  (U) Transportation and Communication: 3 percent of the 
2006 budget.  New projects costing 3.1 billion USD, encompass 
5700km of new roads, ports, airports, and railroad 
development, and new postal services. 
 
¶12.  (U) Specialized Credit Institutions:  As with last year, 
the budget includes appropriations for replenishing 
development funds at Saudi Credit Bank, the Real Estate 
Development Fund and Saudi Industrial Development Fund to 
increase lending programs, but the Ministry of Finance failed 
to delineate the total expenditures allotted to this 
category.  2005 expenditures totaled 2.7 billion USD and 4 
percent of the total budget allocations. 
GFOELLER