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Pressing on with reforms

For the first time in a generation, Saudi Arabia has posted two budget surpluses in a row. Sustained oil prices underlie this, though, and economic reform needs to be kept at the top of the kingdom's agenda.

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CONTINUED HIGH OIL prices are setting the Saudi Arabian budget on course for a second year of surplus, structural reforms are starting to come into effect and the private sector is beginning to grow at a level needed to create jobs and reduce dependence on oil.

The most important question now facing the country's economic planners is whether they can sustain the momentum of change and ensure that the best-qualified figures are in place to control the transformation to an open, private-sector-driven economy.

Their task is hampered by the unstable international background. Despite tough and overt security in the kingdom and a robust campaign against terrorism, there have still been attacks on government buildings and compounds housing nationals and expatriates.

And relations between Saudi Arabia and the US – central to both countries' foreign policies for the past 25 years – continue to come under strain as the conflict in Iraq shows no sign of ending.

Policymakers are also under pressure to make the non-oil economy grow sufficiently fast to generate jobs for Saudi nationals. Some 60% of Saudis are younger than 20 and with annual growth of 3% the population will become even more youthful.

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