The island of stability

Over the years, Saudi Arabia has been described as an island of stability in a region reeling under continuous turmoil. Thanks to the prudent management of its economy. Yet the benefits of this policy exceeded the borders of the Kingdom to the region and the world at large. That is the outcome after reading the final report released by the International Monetary Fund (IMF) this month on its usual annual consultation under article 4.
Three concrete main steps have been taken by the Kingdom’s policy makers and cited by the report support this claim. The first is the decision to increase oil production to cover up for the shortfall in Libyan production in the early stages of last year’s revolution that toppled in the end the regime of Muamar Qaddafi and continue to keep an eye on the market to ensure that no customer is turned back because of lack of supplies. That decision to keep the markets well supplied helped in sending a positive and assuring message to a nervous world that have not got out of the wood yet as far as the economic crisis of 2008 is concerned. Needless to say that a tight oil market is the last thing world economy needs. The current debate in the United States on whether to release some supplies from the Strategic Petroleum Reserve to ease the climbing gas prices is yet another example of this.
The second step was the Kingdom’s commitment to provide $ 15 billion in additional resources for the IMF to help it meet growing needs to get into rescue operations for various economies in the region and beyond. The euro zone is a good example where the IMF got involved in huge plans to bail out some economies so as to avoid dire implications for the world economy as such falling into recession. Such exercise is made possible by the kind of the Saudi commitment to provide new resources. In January, the IMF said it needed an additional $ 500 billion to lend and $ 100 billion to put in reserves as a cautionary measure against potential euro zone risk. Of that already the euro zone countries have already committed $200 billion, while the Kingdom and China emerged as the two leading non-Western and in particular non-euro zone contributors.
Additionally and more significant is the continuous role Riyadh undertook for regional support. Providing help to various countries in the region has been an established policy taking various forms from budget support to placing some money in central banks to shore up their hard currency reserves, to classical loans to funding development projects and so on.
However, it is significant that such undertaking continued during last year and the first five months of this year and especially in countries like Egypt, Yemen, and Tunisia that have been going through the Arab Spring, where their economies were hard hit by the turmoil. That is in addition to Jordan, Morocco, Sudan and others who have not been through the Arab Spring, though continue to face up to difficult political and economic conditions.
The total of $ 17.9 billion pledged represent around 10 percent of the Kingdom’s this year budget, according to calculations made by the Reuters news agency, though actual disbursement stood at $ 3.7 billion.
On the other hand the actual performance shows slightly a different picture. While countries like Tunisia, Morocco, Bahrain and Oman are yet to receive some disbursements; Yemen on the other hand got more than the IMF figures show. According to that report, Yemen was given $ 350 million, but the Yemeni officials have a different story saying that their country has received more than $2.2 billion that included oil and fuel support in addition to $ 1 billion placed in the central bank.
Egypt on the other hand seems to be topping the list with more detailed disbursements going to various fields that included a $ 1 billion deposit at the country’s central bank to support its foreign reserves, a payment of $500 million in form of grants, another $ 500 million from the Saudi Fund for Development to finance various projects, in addition to $ 200 million assigned specifically to small size projects and $ 750 million that have been allotted to finance Saudi exports to the Egyptian market.
One aspect that has been covered in details is the indirect support through the remittances of foreign workers in the Kingdom back home who run into billions of dollars and in the case of Egypt as well as other countries it represent one of the main sources of foreign currency for their economies.
This is a detailed picture of how part of the oil surplus has been used regionally nearby outside the country. After all, to help consolidate stability back home, there is a need for stability around in the region.