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Total Economic Volume of GCC Monetary Council Estimated at $751b: SAMA Governor
Our Correspondent / 6 January 2010
JEDDAH — The total economic volume of the four-member Gulf Cooperation Council (GCC) Monetary Council is estimated at about $751 billion, according to Muhammad Al Jasser, governor of the Saudi Arabian Monetary Agency.
The Arabic business daily Al Eqtesadiyyah quoted Al Jasser as saying that the monetary council would strengthen the GCC economies and boost their economic and commercial relations.
He said the monetary policies of the four GCC countries are identical with their currencies pegged to the US dollar, except that of Kuwait, and added that Kuwait has affirmed its commitment to the Monetary Union.
Al Jasser said Saudi Arabia does not need to change the US dollar as a peg to its riyal currency. “The current exchange regime has served the national economy in an excellent form over the past two decades,” he said, and added that there is an agreement between GCC countries to keep the dollar link until they enter the Monetary Council.
He explained that nothing justifies operating a change in the foreign exchange regime nor introducing adjustments to the exchange rate of the riyal versus the US dollar based on the periodic fluctuations of the dollar’s exchange rate in international markets. “Saudi Arabia has been linking the riyal to the US dollar since 1986,” he said
Al Jasser said that Saudi Arabia’s monetary policies were instrumental in curbing inflation rates in past years. “Monetary policy plays a big role in facing inflationary pressures in a country,” he said, added that the latest inflation was caused by an increase in prices of products in countries that export to Saudi Arabia.
“We face this inflationary trend by subsidising prices of essential commodities and supporting low-income groups,” he said. He said the monetary policy in 2010 would be adopted after closely analysing the country’s economic situation and world market developments.
Asked about an increase in the interest rate on loans, Al Jasser said the commission charged for loans are based on three fundamental factors: Cost, risk and competition. “As a result of stiff competition between local banks to attract customers, the commission for loans is fixed on the basis of these three factors,” he added.
“We at SAMA want that customers should be aware of how much they have to pay back after taking loans and we ask banks to explain lending conditions to customers,” he said.
Al Jasser said Saudi banks were least affected by the global crises. “The rate of lending compared to the private sector gross domestic product has been increasing continuously,” he said, refuting suggestions that banks had reduced lending operations. He denied allegations that the fall in interest rate had encouraged Saudi banks to invest in foreign countries. “I don’t agree with this assumption because most of the investments of local banks are in the kingdom. Financial organisations look for safe and low-risk investment opportunities irrespective of geographical locations and these incentives are abundant in Saudi market,” he said.
International reports have shown that Saudi Arabia is one of the most attractive places in the world for investment.
Speaking about the debts of business conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros, Al Jasser said they could affect the profits of some Saudi banks because of allocations made for suspicious debts. However, he added that the incident would not affect the strength and solvency of Saudi banks.
“Saad Group and Algosaibi are family business institutions that are not directly or indirectly supervised by SAMA,” he said. Commercial banks should take necessary precautions while providing loans.
“What happened in Saad Group was not a settlement but a setoff financial operation for assets that were mortgaged,” he said.
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