Speech by H.E. the Governor to the
Custodian of the Two Holy Mosques on the
Occasion of presenting the thirty-ninth annual
report of the Saudi Arabian Monetary Agency.
Custodian of the Two Holy Mosques,
It gives me great pleasure to present to Your Majesty the thirty-ninth annual report of the Saudi Arabian Monetary Agency. The report reviews most prominent economic developments in the Kingdom for fiscal year 1422/23H (2002) and latest developments for fiscal year 1423/24H (2003).
During 2002 and the current year so far the Saudi economy has made considerable progress, despite the adverse circumstances prevailing over the Arab world. During 2002, the growth rate of the nominal GDP stood at 2.8 percent. This was mainly attributable to the expansion of 4.0% in the private sector economic activity. The oil sector also grew by 2.5 percent due to favorable crude oil prices. What is more significant is the fact that the growth of the economy has been achieved within a non-inflationary environment. The general cost of living index dropped by 0.6 percent during the year. The surplus in the balance of payments went up to Rls 44.5 billion from Rls 35.1 billion in the preceding year, while the deficit in the budget was down from Rls. 27 billion to Rls 20.5 billion. These data reflect the strength of the Saudi economy and its ability to overcome the negative effects of the crisis witnessed by the region. It is expected that in 2003 the national economy would make greater progress than that made in the previous year because of the stability of oil prices at favorable levels for both producers and consumers, and the government’s continuing process of introducing regulatory and structural reforms in the national economy.
Custodian of the Two Holy Mosques,
It is my pleasure to congratulate Your Majesty on the important decisions taken recently that will support and enhance the growth of the Saudi economy. Among these decisions was the issuance of royal order for restructuring of a number of ministries. The Council of Ministers has also approved the Capital Market draft Law, Insurance Law, Anti-Money Laundering Law and other laws. There is no doubt that these decisions are complementary to institutional measures already undertaken by the government, such as the establishment of specialized councils and approval of a number of commissions and regulations as well as privatization of some public economic activities. These measures have effectively contributed to preparing the domestic economy for meeting the challenges of the coming era.
Custodian of the Two Holy Mosques,
The stability of crude oil prices at favorable levels for both producers and consumers, and the tangible success in the efforts aimed at controlling public expenditures and restoring balance in the state budget are achievements that augur well for the Kingdom. These would help reduce public debt, enhance economic growth rates and create adequate job opportunities for the Kingdom’s citizens. This would require attaching further priority to the efforts aimed at developing an appropriate mechanism for amortizing the public debt and maintaining fiscal balance through rationalizing and scheduling public expenditures, and increasing the volume and channels of non-oil public revenues.
Custodian of the Two Holy Mosques,
The Kingdom has, through its development plans, made great strides in diversifying the productive base of the economy as a strategic choice for supporting sustained economic growth. The Kingdom has also continued to work on various tracks for improving the environment and performance of the national economy and its public and private institutions, and for enhancing investment in modern technology and national human resources. However, the accelerated changes witnessed at the domestic and international economic fronts would require continued work to enhance the participation of the private sector in the development efforts.
Custodian of the Two Holy Mosques,
Over the preceding years, Your government has exerted fruitful efforts in implementing the privatization program of a number of public institutions. The success of this program would certainly help reduce fiscal burden on the state budget, improve utilizing available recourses and upgrade the quality of services. Moreover, it would enhance the opportunities of domestic and foreign private investment in important sectors such as telecommunications, electricity, water, communications, transport and other vital sectors. In this context, I would like to laud the successful experience of floating part of the shares of Saudi Telecommunication Company for public subscription. This would encourage undertaking a similar step in the near future. It is hoped that the new Capital Market Law would contribute to the enhancement of efforts exerted for the success of the privatization program in the Kingdom.
Custodian of the Two Holy Mosques,
The Saudi society is characterized by its high population growth rate, especially the youth group. As a result, the annual number of the youth entering the labor market has increased at rates higher than those of new job opportunities, creating thereby a challenge to economic and social development. This issue has preoccupied officials at the various sectors, at the top of which are the Labor Force Council, education and training institutions and the chambers of commerce and industry. Therefore, the development of education and training curricula, to meet the labor market needs, has been accorded special attention by Your judicious government. This would help prepare the youth to undertake jobs required by the sectors of the modern economy.
Custodian of the Two Holy Mosques,
Let me now review briefly the salient monetary and banking developments included in the thirty-ninth annual report of the Saudi Arabian Monetary Agency. During 2002 and the current year so far, the Kingdom’s monetary policy continued to maintain the stability of the national currency and domestic prices and ensure the soundness and strength of the domestic banking system. This stability is an essential prerequisite for achieving sustainable economic growth. During the first three quarters of 2003, money supply went up by 4.1 percent and bank deposits increased by 4.8 percent. Commercial bank claims on the government and private sectors rose by 10.8 percent. Moreover, banks enhanced their capital base, concentrated on high-return and low-risk assets, developed their banking services and intensified their use of modern technology. This contributed to an increase of 5.0 percent in their profits and a high Capital Adequacy ratio of 18.7 percent compared with 8 percent prescribed by Basel Committee. The domestic share market continued to perform well for the fifth consecutive year, reflecting great optimism about the domestic investment climate. The share price index rose in the first three quarters of 2003 by 61.1 percent. Based on the strength of the Saudi economy and its banking and financial sector, the international rating agency of Standard and Poors has granted the Kingdom (A+) rating for national currency debt and (A) for long-term foreign currency debt. These are high ratings as compared with international and regional ratings.
Custodian of the Two Holy Mosques,
In this context, it is my pleasure to laud the enactment of “The Capital Market Law” which is considered a significant qualitative leap in the history of the Saudi capital market. The Law will contribute to restructuring the Kingdom’s capital market on new and sound foundations that broaden its base, enhance confidence in it, attract investments, and provide integrated regulatory reference to the market that includes the most important principles, foundations and provisions covering all the aspects of the market. The Saudi Arabian Monetary Agency, in cooperation with commercial banks, has endeavored over the last decade to prepare an adequate basis for the enhancement of this Law by employing and training best national human resources and introducing the latest international electronic systems.
Custodian of the Two Holy Mosques,
In conclusion, I would like to commend the successful cooperation of government and private entities that provided SAMA with necessary information for preparing this thirty-ninth annual report. Also, I would like to call upon all government and private entities for further transparency and disclosure of data and information that would play a crucial role in helping officials at government and private sectors to take proper economic and investment decisions. This is actually in harmony with the Council of Ministers’ approval of periodic and regular publication of financial and economic data due to their importance in supporting economic and social development and developing the data base of the Kingdom.
May Allah bless you and guide Your steps to greater success
