JEDDAH, 18 September 2006 — The government’s large-scale spending on infrastructure and social service projects will strengthen the Kingdom’s economic performance, says Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency (SAMA).
“Custodian of the Two Holy Mosques King Abdullah’s policy of giving priority to spending on infrastructure and social services will strengthen the economy in the medium term and improve the prosperity of citizens,” the Saudi Press Agency quoted Sayari as saying.
Addressing a meeting of the International Monetary and Financial Committee in Singapore, Sayari said the Saudi economy was continuing its strong performance as a result of suitable economic policies adopted by the government and soaring oil prices.
The government has already launched three major economic cities in Rabigh, Hail and Madinah in order to provide infrastructure facilities required for carrying out industrial, educational, information technology, real estate and other projects worth more than SR155 billion.
He said the higher ratings given by international rating agencies such as Standard & Poor’s and Fitch would enhance investor confidence in Saudi economy.
Standard & Poor’s Ratings Services raised the Kingdom’s long-term foreign currency credit rating from ‘A’ to ‘A+’ last April on the basis of its excellent financial performance.
The rating agency also affirmed its long-term local currency rating at A+ and short-term sovereign credit rating at A-1. “The outlook on both the foreign and local currency ratings is stable,” the agency said in a statement.
In its statement, S&P said SAMA’s foreign reserves increased rapidly in recent years, and are expected to top $220 billion by the end of 2006 (from $92 billion in 2004), which is sufficient to cover about 23 months of current account payments (including private transfers). Saudi Arabia has maintained its top ranking for doing business in the Middle East and North Africa (MENA) region. According to the World Bank’s International Finance Corporation’s (IFC’s) 2007 Ease of Doing Business Index, the Kingdom ranked 38th, keeping pace with its performance the previous year. This is despite substantially increased competition from both previously ranked countries and 20 new rivals.
While talking about international economic situation, Sayari said most countries had achieved economic growth in excess of their expectations. “American economy continued its expansion despite increased recovery in the euro region, economic expansion in Japan and continuing strong performance of developing countries.”
Sayari attributed the growing oil prices to security situations in certain regions, high demand in world market, speculative deals and shortage in the supply of refined oil products. He said oil producing and exporting countries (OPEC) including Saudi Arabia were making strenuous efforts to stabilize international oil market. He also pointed out that Saudi Arabia and other OPEC members were carrying out ambitious investment projects to meet growing world market demand.
According to Minister of Petroleum and Mineral Resources Ali Al-Naimi, the Kingdom will invest over SR262 billion ($70 billion) in its oil and gas sector over the next five years as part of its commitment to keep a spare oil output capacity cushion of 1.5 to 2.0 million barrels per day at all times.
Naimi said that as part of its commitment to keep the energy market well supplied, crude output capacity would be raised to 12.5 million bpd by 2009 through an investment of around SR67 billion ($18 billion).
The IMF committee meeting in Singapore was held under the chairmanship of Gordon Brown, chancellor of the exchequer of the United Kingdom. The committee welcomed the ongoing strong and broad-based global economic expansion. “Growth is expected to remain robust in 2007,” an official statement issued by the committee said.
