Factors Affecting The Import Of Wheat In Saudi Arabia

The modern economy of Saudi Arabia depends primarily on oil exports. Oil being the source of most of the country's exports, foreign exchange, and government revenues, it follows that the oil sector affects the economy rather than the economy affecting the oil sector. Saudi Arabia lacks natural resources for most of its essential goods and because of sudden high income, it has become necessary to introduce new strategies for producing necessary goods and services. Since Saudi Arabia depends more on foreign trade then most other countries in the world, it has to export almost all of the oil it produces - oil bing the country's only export commodity. Thus, Saudi Arabia is almost entirely dependent on the international market, which is, in turn, affected by oil prices. Like the oil sector, agriculture has also received the Saudi Arabian government's keen attention. The agricultural sector is estimated to have contributed 1,035.9 million ryals in 1970, about 6.5 percent of the Gross Domestic Production. The agricultural sector's annual growth rate was 4.1 percent in 1968, 3 percent in 1969, then estimated in 1970 at about 4 percent. Whereas this rate is less than those for other sectors in the Kingdom, it is not low when compared with growth rates in the developing countries. The Kingdom's imports of all goods have been increased at an average annual rate of about 70 percent, but in 1976 rose by 83 percent. The value of foodstuff imported financed by commercial banks in 1976 rose by 10 percent, while the value of other imports increased by 61 percent. Imports of food grains rose by about 12 percent per annum in the period between 1956 and 1970. Imports of wheat, flour, and rice rose increasingly because of the factors mentioned earlier. Wheat is considered to be the principal agricultural crop in Saudi Arabia. In the last few years domestic wheat crops faced many production and marketing problems, such as increasing demand and fluctuating supplies of wheat and flour. Thus this paper provides a study of the factors that affect imports of wheat and flour, such as an increase in oil export and population. The objectives of this paper are to: 1) To estimate the demand equation for imported wheat and flour during the period between 1960 and 1976; 2) To identify the most important factors affecting the imported quantities of this commodity; 3) To identify the most important socio-economic factors affecting the Saudi economy; 4) To give a general picture of the balance of payments and its effect on foreign trade; and 5) To introduce the Kingdom's background position of production and imports for wheat and flour.