Interest-free loans used by the Saudi government as a transfer mechanism of oil revenue to the private sector (Saudi Arabia) (Ph.D. Dissertation)

Prior to 1970 the Saudi Government faced severe socioeconomic problems, including low contributions of the private sector to GDP and oil revenues as the main source of the national income. As oil revenues rapidly increased between 1972 and 1981, the government attempted to encourage output of the private sector. The primary goal was to diversify income sources in order to decrease the dependency on oil revenues. The government provided interest-free loans to the private sector that increased the gross domestic fixed capital formation of the private sector. This study explains how the private sector was able to expand so significantly. Expansion of the private sector was stimulated because of the low cost of capital in Saudi Arabia. Despite rising capital costs, Saudi companies will still be able to compete either nationally or internationally, and increased market competition will stimulate the economy.