Riyadh: A leading Saudi financial analyst and economic expert has called for the reconsideration of the exchange rate of Saudi riyal without de-pegging it from the US dollar.
Dr. Abdul Wahab Abu Dahesh said the exchange rate should be returned to the value of 1986 when the riyal was 3.65 against the dollar. Abu Dahesh noted that the US dollar exchange rate indicates the weakness of the US economy, but not the Kingdom's.
"To the contrary the situation in the Kingdom is totally different as the economy is witnessing significant economic growth with remarkable improvement in foreign reserves that could exceed one trillion Saudi riyal," he said. He said those in favour of the current Saudi monetary policy of leaving the exchange rate as it is and having the riyal pegged to the dollar, have no strong justifications.
Some Saudis believe that in order to improve the situation, an improvement should be made in regard to exports and to encourage more tourists and pilgrims to visit the Kingdom. "Those in favour of improving Saudi exports are exporters who are marketing their products in international markets. Their justifications only emanates from a personal interest angel," Abu Dahesh said.
He said the revaluation of riyal had now, more than any other time, become an urgent issue.
"This will help in increasing the purchasing power of individuals and companies and remarkably slash the value of imports," he said.
He added that although this might slightly affect exports, it would have a significant impact on the economy, as the exchange rate is not an important factor in encouraging exports.
However, Hamad Al Sayyari, the governor of the Saudi Arabian Monetary Agency, the Kingdom's central bank, has repeatedly ruled out revaluing the riyal, saying homegrown factors such as rents and government spending are fuelling inflation.
Meanwhile, John Sfakianakis, chief econ-omist at Saudi Arabia's SABB bank, expressed, said in a recent report that Saudi Arabia will not and does not need to revalue or de-peg from the US dollar, unless the dollar depreciates at an alarming rate over the medium term.
"Currency stability plays an important part in attracting much-needed foreign investment into the region, but it is a factor that does not apply in the event of continuous currency depreciation," he said.
Your comments
Yes, Saudi Riyal and UAE's Dirham have to be revaluated because of weaking dollar.
Walan
Riyadh,KSA
Posted: October 18, 2007, 10:03
It is not worth the value of Gulf currencies go down, when US economy goes down, instead Gulf states' economy growing rapidly. It gives very tough time to local traders, who import goods from other countries, victims of US Economy.
Aslam
Dubai,UAE
Posted: October 18, 2007, 08:16
