He told Reuters in an interview the kingdom’s vast financial reserves would be its “first line of defence” to meet any deficits, adding public debt had fallen to below 12 percent of gross domestic product from over 100 percent a few years ago.

While that had increased the government’s ability to tap debt markets if necessary, Assaf said: “I don’t expect that this year and I don’t expect it next year.”

Saudi Arabia increased budgeted spending for 2009 and, with world oil prices collapsing, projected a 65 billion riyal ($17.3 billion) deficit, which would be its first since 2002.

The Saudi oil and petrochemical industries have been hit by falling demand as a global recession bites, but Assaf said other sectors of the economy remained vibrant, stimulated by private as well as government investment in huge projects.

“Saudi Arabia is one of the few bright spots ... as far as the world economy is concerned,” he said.

Assaf declined to disclose the oil price on which the 2009 budget was based, but described it as conservative.

Global oil prices have fallen below $40 a barrel, more than two-thirds below their July peaks of around $147.

Lower oil prices were helping to ease the severity of global recession, Assaf said. But they could endanger energy investment, which he said was already rare outside Saudi Arabia.

“One is concerned this will have a negative impact in the future when the world economy starts recovering,” he said.

He reiterated that Saudi Arabia’s King Abdullah views the fair oil price as $75 a barrel. “He has been consistent on that, even when the price of oil was $140 or $150.”

Saudi Arabia, the only Arab member of the Group of 20 developed and developing nations, was playing its part in efforts to steer the world out of recession, Assaf said.

It was doing this, he said, by trying to stabilise oil prices, managing its financial resources responsibly and keeping big Saudi projects on track—thereby stimulating the economy and creating contract opportunities for foreign companies.

“We are spending locally on development and other needs, and that is helping indirectly the world economy. We are doing it for ourselves, yet it is helping the rest of the world.

“We will play our part ... but not more, not less.”

Some Western leaders last year urged Saudi Arabia to contribute more to IMF funds to help combat the effect of the world downturn.

Assaf also said he expected a mortgage law, which has been in the works for more than a decade, to be enacted this year.

“It should be in 2009, definitely,” the minister declared.

“We need this law regardless of ... the temporary situation of the financial sector, whether it is in a very healthy situation or in a bad situation.”

The long-awaited law is seen as vital in a country where fewer than a quarter of Saudi households own their own homes, one of the lowest ratios in the Gulf Arab region.