IMF urges rethink on Saudi's dollar peg

RIYAL RETHINK: The IMF is urging the Saudi government to think again about the riyal's peg to the dollar. (Getty Images)

The International Monetary Fund (IMF) has urged the Saudi Arabian government to rethink the riyal’s peg to the dollar should inflation remain at current levels.

“Most Directors considered the benefits of maintaining the peg to outweigh the cost of higher short-term inflation, provided current inflationary pressures prove temporary,” the IMF said in a statement released on Monday.

“If, however, inflation should persist and the Gulf Cooperation Council monetary union be delayed, they recommended to consider also alternative exchange rate regimes.”

Inflation in the Kingdom reached 10% in April as oil prices continued to soar, food and commodity prices continued their ascent and the dollar remained depressed.

The IMF said inflation poses the main challenge for authorities in the period ahead.

Saudi officials have denied that the riyal’s peg to the dollar is the main cause behind inflation in the country, choosing instead to highlight other factors, such as rising commodity costs and a shortage of housing.

IMF directors also said they welcomed the Saudi government’s plans to increase oil production and refining capacity to support global oil market stability.

Public expenditure should focus on investments in infrastructure, education, and public services, with a view to diversifying the economy and encouraging job creation, they said.

Saudi Arabia’s real GDP growth is projected to reach 5 percent in 2008, and a record current account surplus of $191 billion is projected on the back of higher oil prices.

Saudi inflation climbs to 10.6%
Annual inflation in June rises on back of soaring food and housing costs, latest government data reveals.

Print | Email | Discuss this article |

READERS' COMMENTS

View all comments (1)

Have your say

IMF urges rethink on Saudi's dollar peg
Posted by hombil, Muscat, Oman on Wednesday 13 August 2008 at 16:49 UAE time

Would this not be applicable to other GCC countries too? Inflation rate in Oman is at 14%, which is much higher than Saudi's!

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM