ABSTRACT
In Western economic literature, the need for government involvement in economic activities is often rationalized by reference to some generally recognized imperfections of the market mechanism. This chapter analyses Saudi Arabia's government finance sources and appropriations, their trends and structural changes and also their implications for development. It concentrates on problems of mobilizing financial resources in general terms within a developing framework. The relative share of various source of government revenues other than oil remains not only relatively insignificant but in general has been declining. In the pre-1970 era Saudi Arabia's allocation policies were intentionally implemented through the budgetary process, despite the non-existence of development plans. Three fiscal functions are identified in the discussion of budgetary policies: the allocation function, the distribution function, and the stabilization function. The guiding principle must be to maximize the social rate of return of Saudi's investible resources within the framework of the political, cultural, social and economic aspirations of the people of Saudi Arabia.
