Business | Banking
Expert urges change in Saudi dollar peg
A top Saudi financial analyst has said he is surprised by the Gulf Cooperation Council (GCC) states in general and Saudi Arabia in particular continuing to peg their currencies to the falling US dollar.
- By Mariam Al Hakeem, Correspondent
- Published: 00:35 July 1, 2007
Riyadh: A top Saudi financial analyst has said he is surprised by the Gulf Cooperation Council (GCC) states in general and Saudi Arabia in particular continuing to peg their currencies to the falling US dollar.
The dollar's declining value against major currencies has been blamed for contributing to imported inflation in the Gulf countries.
"The question is what are the real reasons for continuing the same policies for a long period of time without any changes or amendments?" Mohammad Bin Abdullah Al Suwayed asked in published remarks.
In May, Kuwait decided to delink its currency from the dollar, while other GCC central banks insist they will continue to peg their currencies to the dollar until they achieve monetary union in 2010.
"Pegging the Saudi riyal with the dollar is not a sacred matter that cannot be changed. It is a legacy of previous eras when the government was the official sponsor and supervisor of the country's economic development, which requires maintaining continuing financing from the oil revenues generated in dollars," Al Suwayed noted.
Flexible approach
He added that Saudi Arabia's monetary policy could be dealt with in all flexibility. A margin of 2.5-3 riyals can be established for fixing the riyal against the dollar with the support of changing interest rate and the intervention of the central bank from time to time, he said.
Al Suwayed indicated that the biggest problem with the current monetary policy is the continuation of government control in economic development. He proposed increasing the participation of the private sector in this regard.
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