|The central institution of the Saudi Arabian government is the Saudi monarchy. The Basic Law of Government adopted in 1992 declared that Saudi Arabia is a monarchy ruled by the sons and grandsons of the first king, Abd Al Aziz Al Saud. It also claims that the Qur’an is the constitution of the country, which is governed on the basis of the Sharia (Islamic Law). According to The Economist’s Democracy Index, the Saudi government is the ninth most authoritarian regime in the world.
There are no recognized political parties or national elections, except the local elections which were held in the year 2005 when participation was reserved for male citizens only. The king’s powers are theoretically limited within the bounds of Shari’a and other Saudi traditions. He also must retain a consensus of the Saudi royal family, religious leaders (ulema), and other important elements in Saudi society. The Saudi government spreads Islam by funding construction of mosques and Qur’an schools around the world. The leading members of the royal family choose the king from among themselves with the subsequent approval of the ulema.
Saudi kings have gradually developed a central government. Since 1953, the Council of Ministers, appointed by the king, has advised on the formulation of general policy and directed the activities of the growing bureaucracy. This council consists of a prime minister, the first prime minister and twenty ministers.
Legislation is by resolution of the Council of Ministers, ratified by royal decree, and must be compatible with the Shari’a. A 150-member Consultative Assembly, appointed by the King, has limited legislative rights. Justice is administered according to the Shari’a by a system of religious courts whose judges are appointed by the king on the recommendation of the Supreme Judicial Council, composed of twelve senior jurists. Independence of the judiciary is protected by law. The king acts as the highest court of appeal and has the power to pardon. Access to high officials (usually at a majlis; a public audience) and the right to petition them directly are well-established traditions.
The combination of relatively high oil prices and exports led to a revenues windfall for Saudi Arabia during 2004 and early 2005. For 2004 as a whole, Saudi Arabia earned about $116 billion in net oil export revenues, up 35 percent from 2003 revenue levels. Saudi net oil export revenues are forecast to increase in 2005 and 2006, to $150 billion and $154 billion, respectively, mainly due to higher oil prices. Increased oil prices and consequent revenues since the price collapse of 1998 have significantly improved Saudi Arabia’s economic situation, with real GDP growth of 5.2 percent in 2004, and forecasts of 5.7% and 4.8% growth for 2005 and 2006, respectively.
For fiscal year 2004, Saudi Arabia originally had been expecting a budget deficit. However, this was based on an extremely conservative price assumption of $19 per barrel for Saudi oil and an assumed production of 7.7 Mbbl/d (1,220,000 m³/d). Both of these estimates turned out to be far below actual levels. As a result, as of mid-December 2004, the Saudi Finance Ministry was expecting a huge budget surplus of $26.1 billion, on budget revenues of $104.8 billion (nearly double the country’s original estimate) and expenditures of $78.6 billion (28 percent above the approved budget levels). This surplus is being used for several purposes, including: paying down the Kingdom’s public debt (to $164 billion from $176 billion at the start of 2004); extra spending on education and development projects; increased security expenditures (possibly an additional $2.5 billion dollars in 2004; see below) due to threats from terrorists; and higher payments to Saudi citizens through subsidies (for housing, education, health care, etc.). For 2005, Saudi Arabia is assuming a balanced budget, with revenues and expenditures of $74.6 billion each.
In spite of the recent surge in its oil income, Saudi Arabia continues to face serious long-term economic challenges, including high rates of unemployment (12 percent of Saudi nationals), one of the world’s fastest population growth rates, and the consequent need for increased government spending. All of these place pressures on Saudi oil revenues. The Kingdom also is facing serious security threats, including a number of terrorist attacks (on foreign workers, primarily) in 2003 and 2004. In response, the Saudis reportedly have ramped up spending in the security area (reportedly by 50 percent in 2004, from $5.5 billion in 2003). Saudi Arabia’s per capita oil export revenues remain far below high levels reached during the 1970s and early 1980s. In 2007, Saudi Arabia’s citizens earned around $20,700 per person, versus $22,589 in 1980, but it is catching up. This 80 percent decline in real per capita oil export revenues since 1980 is in large part because Saudi Arabia’s young population has nearly tripled since 1980, while oil export revenues in real terms have fallen by over 40 percent (despite recent increases). Meanwhile, Saudi Arabia has faced nearly two decades of heavy budget and trade deficits, the expensive 1990-1991 war with Iraq, and total public debt of around $175 billion. On the other hand, Saudi Arabia does have extensive foreign assets (around $110 billion) which provide a substantial fiscal “cushion.”
Saudi municipal elections took place in 2005 and some commentators saw this as a first tentative step towards the introduction of democratic processes in the Kingdom, including the legalization of political parties. Other analysts of the Saudi political scene were more skeptical.