Tuesday 23 / April / 2024
New York: Saudi billionaire Prince Alwaleed bin Talal raised the possibility that the Kingdom may need to depeg its currency in the future as the country undergoes unprecedented social, political and financial change.
“As a last resort maybe sometime two, three years down the line it is a possibility,” Alwaleed, speaking in an interview with Bloomberg TV, said of a potential change to the riyal’s fixed valuation against the dollar. “Meanwhile, it should stay where it is right now. There are so many things happening.”
Saudi officials have repeatedly sought to refute speculation on maintaining the currency’s peg to the dollar as the country battles slowing growth and slumping oil income. Central Bank Governor Ahmed Alkholifey earlier this week again reiterated the commitment to maintaining the peg.
The world’s biggest oil exporter halted payments to contractors last year as it sought to rein in a budget deficit that reached about 15 per cent of gross domestic product. Authorities also have introduced a package of austerity measures, including cuts to public-sector wages and energy subsidies. Economic growth is expected to slow to 1.3 per cent this year, according to a Bloomberg survey of economists, the lowest level since the 2009 global recession.
Oil dependence
The currency has been fixed at about the same rate since the 1980s. Since its introduction, the riyal’s 3.75-per dollar peg has been instrumental in shielding the economy from the volatility of oil and natural gas.
Saudi Arabia is working to reduce the Middle East’s biggest economy’s reliance on oil, which provides three-quarters of government revenue, as part of a plan for the biggest economic shakeup since the country’s founding.
