DUBAI: Saudi Arabia, which unveiled plans to launch a $400 billion development program, has ample funds for more investment spending over the next few years despite global financial turmoil, a central banker said yesterday.
Muhammad Al-Jasser, vice governor of the Saudi Arabian Monetary Authority (SAMA), said the Kingdom’s economy was well-protected from the “vagaries” of financial markets.
“We are receiving the winds flowing with contagion but we do not have the crisis that is swirling in Wall Street,” the central banker said at a business forum in Dubai.
Finance Minister Ibrahim Al-Assaf said on Saturday in Washington that the Kingdom planned to implement a $400 billion development and investment program in the oil and government sectors over the next five years.
Saudi Arabia also rebuffed talk it would hand more cash to the International Monetary Fund (IMF), saying there needed to be equitable burden-sharing between all IMF member states.
In Dubai, Al-Jasser said potential investments would cover multiple sectors. “We have enough in our war chest to deploy all of the necessary investment in infrastructure, youth, education, mining and petrochemicals,” he said. “Our development budget is robust.”
The global financial crisis has prompted Gulf Arab states, like the rest of the world, to enact a slew of policy measures to combat tight credit conditions and negative investor faith.
Saudi Arabia has cut interest rates, lowered bank reserve requirements, guaranteed bank deposits and poured billions in long-term deposits into the banking system.
The central bank vice governor said yesterday that Gulf Arab countries were working together to mitigate the effect of the crisis on the region, even if there were few public signs of such coordination.
He added that Saudi Arabia’s SR1.3 trillion ($346.7 billion) in foreign reserves was in “very liquid, very safe, minimal risk” international assets.
“Our bank exposure to international markets is extremely small,” he added.
Separately, Al-Jasser told Reuters that credit growth in Saudi Arabia, which more than tripled in the last year, was likely to slow down, as private investors rethink borrowing plans during the global financial crisis.
Still, Saudi Arabia’s non-oil private sector would grow in 2009, on par with this year, as the Kingdom pushes ahead with major expansion plans.
Credit growth of 37 percent in the first nine months of the year compared to just 12 or 13 percent in the prior-year period, he said. “Thirty-seven percent is a very high rate that will probably slow down in the years to come,” Al-Jasser told Reuters in an interview. “The main reason is that this year was an extraordinary year of borrowing and spending by the private sector.”
While growth of the oil sector could decline as OPEC slashes output, the non-oil private sector would expand 6 percent this year and “hover close to that” in 2009, he said.
Al-Jasser, whose country is the only Arab state that is a member of the G20, said states in the Gulf Cooperation Council (GCC) should take a greater role in re-modeling the global financial order.
“I think the more participation in an international forum the better able we will be in preserving and protecting our interests and having our voice heard,” he said.
