Saudi Arabia yesterday sought to reassure its Gulf allies that there would be no change in its monetary policy following the replacement of its monetary chief within a wide cabinet reshuffle ordered by King Abdullah.
The Kingdom's Finance Minister Ibrahim Al Assaf said the replacement of Central Bank Governor Hamad Saudi Al Sayyari with his Deputy Mohammed Al Jasser as part of a partial cabinet shake-up was a "continuation of the reform policy," initiated by King Abdullah to diversify the oil-reliant economy.
"I do not think there will be any change in the Kingdom's monetary policy in the future," he was quoted as saying by local newspapers.
"I can affirm to you that the wise policy followed by Saudi Arabian Monetary Agency (Sama) in the past will continue, including its strong and direct supervision of the banking sector. Therefore, we expect more stability in the monetary policy."
Assaf said Sayyari was replaced after his 25-year term expired, adding that his efforts during his service had largely supported the Kingdom's monetary policy.
Saturday's change at Sama, the Kingdom's Central Bank, coincided with one of the world's worst financial crises and accelerating plans by Saudi Arabia and its partners in the six-nation GCC to create a landmark monetary union.
Saudi Arabia, which controls a quarter of the world's extractable oil deposits, is one of the GCC members that is pushing to host the proposed common central bank which will oversee the monetary union and common currency. The UAE and Bahrain are also vying to be the headquarters of the central bank.
The GCC members, except Oman which has pulled out of the monetary union, have been haggling for years over the proposed currency and whether it would be pegged to a basket of currencies or remain tied to the US dollar.
"I don't think this change in Sama will affect the GCC plans to establish a monetary union," Saeed Al Shaikh, Chief Economist at the Saudi National Commercial Bank, said. "I believe Saudi Arabia's policy towards the GCC monetary union is decided at higher levels, that is, its politics."
In his first statement to Saudi newspapers after his appointment as Sama governor, Al Jasser said he would work to restore economic stability and prosperity in the Kingdom after it was affected by the global crisis.
"The domestic economy will recover more quickly from the crisis than other economies. The Kingdom has not been affected by the crisis as much as other economies as our monetary policy has succeeded in mitigating this impact. Growth and prosperity will return to previous levels," he said.
"This is because instructions by the Monarch not to exaggerate in any policy or action that could increase risks to the local economy. These instructions have made the basics of our economy stronger than many other economies."
Asked whether there will be policy changes at Sama, he said: "Saudi Arabia's monetary policy is normally devised with high precession by a team rather than one person. We recognise Sayyari's efforts as a captain of this ship and as part of this team, which comprised many persons, including myself. This policy is now continuing but will keep interacting with all local and global developments."
Born in the Central Saudi town of Bareeda, known for its date production, Al Jasser is holder of a Doctorate Degree in Economics from a California university. He had been Sama's deputy governor for 14 years before his appointment at the head of the institution, which oversees the monetary policy of the region's largest economy and the world's dominant oil exporter.
In the absence of a sovereign wealth fund, Sama manages the Kingdom's overseas financial assets, which exceeded SAR1.7 trillion at the end of 2008. It had been at the heart of hectic efforts over the past year to tackle soaring inflation rates and defend the Saudi rial after a sharp fall in the dollar.