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Thursday, February 14, 1991 / University Daily Kansan
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The Associated Press
Saudis face deficit Promises to pay back allied assistance cause Saudi Arabia to consider loan plan
RIYADH, Saudi Arabia — Saudi Arabia, facing a growing deficit because of the Persian Gulf War, is seeking more than $5 billion in international loans, its first such borrowing, diplomatic sources said yesterday.
Overseas borrowing stems from a growing budget gap resulting from $48 billion in pledges to help the allies finance the war.
The Saudi Arabian Monetary Agency, the official central bank, approached the Morgan Guaranty and provided a guaranteed premium for the loan, the diplomats said.
At Morgan headquarters in New York, Richard Mabony, a representative for the fifth largest U.S. bank, declined to comment. As a matter of policy, Morgan and other big Western banks usually do not release details about any large-scale loan negotiations they may be conducting.
Although food production, construction and other sectors of the private economy are booming, the costs from the gulf campaign could result in an $18 billion government expenditure exceeding the $12 billion deficit posted for the entire previous year; Western economists said.
Saudi commitments to help cover U.S. military costs, its promises of assistance and the potential conflict and the potential cleanup bill for the massive gulf oil spill are the
reasons for the deficit forecast, the economists said.
The $48 billion in war costs include a $13.5 billion bledge to the United States for expenses during the three months of 1991, although diplomats said the payments might be spread over the first half of the year.
The last time the kingdom had to borrow was about 1606 when King Saud ran the treasury dry before being deposed four years later.
Aside from pledges to the United States for its expenses, the kingdom has agreed to provide food, fuel, water and housing for more than 500,000 troops based in the country. The British, French and other partners in the multinational fighting Iraq, though substantially fewer in number, also have lined up for Saudi aid.
President Bush included in his 1992 budget a placeholder amount of $15 billion for the U.S. share of the fighting, and other administration officials have suggested that the cost should be up to 80 percent of the total costs.
The administration has given the following breakdown of pledges received from foreign governments for the first three months of 1991:
■ Saudi Arabia: $13.5 billion
■ Kazuwait: $13.5 billion
■ Japan: $8 billion
■ Germany: $5.5 billion
■ United Arab Emirates: $1.5 billion
■ South Korea: $280 million
Projected costs of Iraq war
A new study estimates gulf war costs based on two scenarios (includes government, private costs in billions of dollars):
Low-cost war
About a 60-day ground war, low world political tensions and short occupation
Total: $164 billion
Direct Occupation military aid
Total: $164 billion
Lost GNP/
increased security costs
prices
High-cost war
A six-month ground war,
greater world political tensions
and long occupation
Total: $268 billion
Lost GNP prices increased security costs SOURCE: Public Citizen
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