Author: BI-ME staff
Source: BI-ME and agencies
Published: 17 February 2008
SAUDI ARABIA. The 150-member Shoura Council that advises the king, will discuss on Sunday the revaluation of the Saudi riyal against the US dollar, rising inflation and the GCC common currency.
Finance Minister Dr. Ibrahim Al-Assaf, Dr. Osama Abu Gharara, deputy chairman of the Financial Committee at the Shoura Council and Hamad Saud Al Sayyari, governor of the Saudi Arabian Monetary Agency will be present at the meeting.
“So far we have not seen any solution to control inflation,” Abu Gharara told Al-Eqtisadiah business daily. Inflation in the Kingdom surged to a record high of 6.5% last December.
Inflation is partly driven by a rise in global commodity prices and the weak US currency.
“We’ll also discuss the possibility of revaluing the riyal against the dollar in tune with its devaluation against other international currencies,” the Shoura member said. He emphasized the need for reviewing the riyal’s exchange rate with the falling American dollar.
"Revaluing the currency is a possible way to face inflation and it will be one of the solutions the council will present today," Abu Gharara was quoted as saying in the pan-Arab daily Asharq Al-Awsat.
The Shura Council can review draft legislation and make recommendations, but these are not binding on the government.
Saudi Arabia has been trying offset the impact of price rises on its 25 million people through measures including a plan announced last month to raise wages, welfare payments and subsidies.
Like most of its neighbours in the world's biggest oil-exporting region, Saudi Arabia's dollar peg means it is forced to track US monetary policy at a time when the Federal Reserve is cutting interest rates to help ward off recession.
Inflation has overtaken official borrowing costs in the largest Arab economy, where the central bank raised bank reserve requirements twice in two months to force lenders to keep more money in their vaults in a bid to slow down credit growth.
Saudi policymakers have repeatedly said the largest Arab economy would not sever its dollar link.
"I don't think that dropping the peg is a magical solution to curb inflation as there are neighbouring countries that changed the peg and their inflation reached record highs," Abu Gharara said, in reference to Kuwait.
The Saudi riyal hit a two-month high of 3.73 against the dollar last week.
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