Riyadh, Saudi Arabia — Faced with declining oil revenues, Saudi Arabia plans to trim its massive level of development spending. Finance Minister Muhammad Aba al-Khail, in an interview here, said, ''We have to live within our limits, which are based on our current oil income and what is feasible to take from our reserves.''
He also appealed to the industrial countries to cooperate with the Organization of Petroleum Exporting Countries (OPEC) in stabilizing the price of oil at a lower level.
''If the oil price is allowed to fluctuate, we will enter an era which is very dangerous,'' he said.
In the government's budget, due in some 40 days, the level of spending will be reduced in current riyals. Sheikh Khail would not spell out the actual size of the cuts for the budget year starting in mid-April. Work on the budget is not complete, he said.
Furthermore, the government does not have a clear idea of the size of its oil revenues. The OPEC nations, in consultation with such other major oil producers as Mexico and Great Britain, are still in the process of negotiating prices and production levels.
However, Saudi Arabia is already spending more than its current revenues. The finance minister indicated that the kingdom needs to sell somewhat more than 6 million barrels a day at a price of $34 a barrel to cover its current level of spending. The current level of oil production is running somewhat under 4 million barrels daily.
Actual spending within the budget has been running in the current budget year at about an $80 billion annual level, though it was budgeted for $92 billion. The government also spends, it is estimated here, nearly $10 billion more for foreign-policy reasons, providing financial assistance to such nations as Iraq, Jordan, and Lebanon.
Sheikh Khail said the nation could get by with a reduced, ''reasonable'' spending program. ''Here in Saudi Arabia,'' he said, ''we have almost completed all our infrastructure needed for the future - roads, communications, housing, ports, airports, and so on. Our need for big spending is almost finished. We are at the beginning of a new phase of development. Our need will be different in nature and lower than it was before.''
That means that for international contractors, Saudi Arabia will be losing some of its luster. Already in the last year or so, the world recession and increased competition have forced contractors to bid with sharper pencils for Saudi contracts.
The business community here has been keen for any news on the budget, but Sheikh Khail had not, prior to this interview, indicated anything about the government's plans.
The finance minister is hoping business itself will somewhat fill the gap resulting from lower government spending in the coming fiscal year.
With privately owned companies having been encouraged to grow rapidly in the last few years by interest-free loans, subsidies, and other incentives, business ''is in a good position to expand,'' Sheikh Khail said. ''Their contribution to the gross national product (the nation's output of goods and services) will jump during the next few years.''
Sheikh Khail, like some other prominent Saudis, also believes that a decline in government spending would be useful in reducing waste and encouraging efficiency. ''I can see a reasonable drop (in the budget) even in nominal terms (in current riyals),'' he said.
The finance minister also indicated that Saudi Arabia's financial aid to other nations will be cut back somewhat. ''It will be within our limits - no question about it,'' he said.
Government officials consistently refuse to cite the level of Saudi Arabia external financial reserves, built up during the days of higher oil prices and production running above 10 million barrels a day. But it is believed here that they amount to about $150 billion, of which some $120 billion belongs to the government and some $30 billion to private companies or individuals. There also are further foreign investments by private individuals or companies that are not listed as assets by Saudi banks. But no one knows how many billions more these are, since Saudis have almost complete freedom to move their assets about the world as they please.
Saudi Arabia's non-oil sector - which, though it amounts to about one-third of total gross national product, remains highly dependent on oil revenues - has been growing rapidly, at an 11 to 14 percent annual rate over the last several years. In the current year it will grow about 8.3 percent, according to the minister. This, however, is still a handsome rate of growth by world standards.
Sheikh Khail noted that the Saudi Arabian economy remains almost completely dependent on its income from the sale of oil. ''The situation is unique,'' he said. ''Wealth comes from oil to the government.'' The government, ''like the father of a family,'' then channels that wealth into education, building infrastructure, and so on.
In concluding the interview, Sheikh Khail called for the industrial nations to help OPEC stabilize the price of oil at a lower level. He said he was worried about the possibility of ''speculators'' pushing the price of oil down too far, resulting in it bouncing back again dramatically. ''It will be a very dangerous situation, not only for the producers of oil but for the consumers,'' he said. ''It will add to the uncertainty in the stock markets and in exchange rates.''
He asked for the ''effective cooperation'' of non-OPEC nations, including Britain and Mexico, in preventing too sharp a plunge in oil prices. Political considerations in ''certain industrial nations'' may make such a plunge appear favorable. ''But it will be a big mistake. It will be useful for the short term, but it will be dangerous for growth and confidence in the long run. It is a situation that needs constructive efforts from the OECD countries (industrial nations) as a whole. It needs a constructive dialogue between the OECD countries and the oil producers.''
But the finance minister did not spell out exactly what such a dialogue could achieve.