Call for revaluation of Saudi riyal

A member of Saudi Arabia's Shoura Council said yesterday he submitted a proposal to the council to revalue the Saudi riyal and the council will discuss revaluation as early as next week.

"I submitted a proposal to revalue yesterday," Walid Arab Hashem, a member of the Shoura, a legislative council appointed by the king, said.

"The next step will be its discussion by the council and if they accept it, they will recommend it to King Abdullah, who will make the final decision," Hashem said.

Another Shoura Council member Usamah Al Kurdi, however, denied that the advisory panel will recommend the government review its policy of pegging the riyal to the dollar.

"We were debating inflation and its impact on the execution of government development projects," he said in a telephone interview yesterday from Riyadh. "We did not specifically discuss the riyal-peg to the dollar. When you discuss inflation, the subject comes up."

Hashem said the US dollar lost a significant part of its value over the past six years and the riyal's peg was adding to imported inflation in the Kingdom.

Hashem said he submitted his proposal independently after the Shoura's inflation committee recently published a report on Saudi Arabia's economy.

Annual inflation hit a 30-year high of 10.5 per cent in April. Saudi Arabia's currency has been pegged at 3.745 Saudi riyals to a US dollar since 1986.

However, Hashem said he does not think depegging completely is a viable option.

"I don't think there is anything better to peg to instead of the dollar as it is a major world currency and even if the riyal was depegged to a currency basket the basket would be predominantly in dollars," he said.



Currency rises

Contracts to buy Saudi riyals in 12 months rose the most since March after Al Riyadh reported a member of the Shoura Council, which advises the government, recommended a revaluation of the riyal against the dollar.

Riyal forwards were 0.4 per cent higher at 3.72 to the dollar, the biggest one-day move since March 12, data compiled by Bloomberg news agency show.

The revaluation should be 20 per cent, a Shoura Council member said yesterday.