‘Euro still has a long way to go’
Published: Feb 17, 2010 20:27 Updated: Feb 17, 2010 20:27
JEDDAH: The Saudi riyal will remain pegged to the US dollar. This was the message Saudi Monetary Agency (SAMA) Gov. Mohammed Al-Jasser gave to the delegates attending the 10th Jeddah Economic Forum 2010 on Sunday.
Defending the dollar's role as the world's main reserve currency, he rejected the call for the International Monetary Fund's Special Drawing Rights (SDR) to be given the reserve status instead.
"The dollar is still pre-eminent in its role as a reserve currency, although in official reserves the euro is gaining in importance,” Al-Jasser said during a panel discussion on the way forward for reserve currencies at the second session of the second day at the Jeddah Hilton. He said the dollar has not been meaningfully challenged since World War II.
Al-Jasser said: "SDRs are not a currency. The SDR serves few of the functions necessary to be an acceptable global reserve currency, such as offering opportunities as an investment medium or being used in settling trade."
Al-Jasser said that although the euro is still far behind the dollar and faces challenges, it is slowly becoming a key reserve currency. "One should expect competition with the dollar in the future," he said. "A multi-polar system is the ideal and I think the euro is moving in that direction."
The European currency still lacks depth and liquidity as an investment instrument, Al-Jasser said, but should gain a greater role eventually. "They (the Europeans) need it, we need it, and everybody in the world needs it."
The other session of the day witnessed interesting deliberations on the need for global economic governance after the crisis and rebuilding faith in financial institutions.
In the morning session, US Deputy Treasury Secretary Neal S. Wolin said the G20 had now become the premier forum for more diverse and balanced coordination of the global economy and had responded quickly to help restore the global financial system. There is growth now in many parts of the world but a number of challenges still exist — market turbulence is still there and as yet, there is no significant job growth.
Wolin acknowledged that in the past, the United States had bought too much and saved too little. This was no longer an option. In addition, US public finance must be put on a sustainable track.
"The US can no longer be the single driving engine of the world economy. The crisis has shown that the economies of all countries are intertwined and that all nations must do their part to build the new financial system, which must be stronger, safer and sustainable," he said.
