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The kingdom says it is faring better than most in the financial crisis, but some Saudis wonder.
RIYADH, Saudi Arabia — The world’s largest oil exporter is navigating the global economic crisis better than most countries because of its large foreign reserves, totaling more than $500 billion, which are mainly in conservative, low-risk investments, such as U.S. bonds.
These reserves, officially reported at $523 billion in February, are likely to be tapped as the Saudi government launches its own “stimulus” spending in an effort to keep the country’s declining economic growth from falling into recession.
According to the kingdom’s largest-ever annual budget, unveiled earlier this year, the government will incur a deficit as it goes forward with large infrastructure projects over the next several years in order to keep the economy and private sector moving.
These deficits can be covered by Saudi Arabia’s foreign reserves, essentially cushioning an economy that is now suffering the effects of drastically reduced oil revenue, huge stock market losses, dwindling business confidence and a reluctance by local banks to extend credit.
“We have managed ... to spare the nation the worst of its repercussions and we are still monitoring the situation with caution and vigilance,” King Abdullah bin Abdul Aziz told the advisory Shura Council this week.
This safety net, however, will only be possible for a few years, economists said, and an extended global economic crisis, which has sent oil prices tumbling from a peak of $147 last July to about $50, could imperil the kingdom’s economy.
Moreover, some Saudis say they are deeply worried about the their country’s economic future, citing an alleged lack of transparency in the banking system, disorganized economic policy implementation, and a private sector that depends too much on government hand-outs.
The Saudi Arabian Monetary Agency (SAMA), which acts as the country’s central bank, “has not forced banks to be fully transparent ... which creates insecurity and uncertainty,” said Prince Fahad Saad Al Saud, a member of the royal family and a businessman in Riyadh.
Al Saud, who has written articles critical of SAMA for being too complacent, said in a recent interview that he believes the government is not disclosing enough information about the economy, which he sees as precarious.