26 March 2009

MANAMA: Saudi Arabia has no shortage of liquidity, and credit grew 15 percent in February compared to the same month of last year, the Saudi Arabian Monetary Agency (SAMA) governor said yesterday.

“We should not exaggerate the problem of liquidity in the Gulf,” Muhammad Al-Jasser told a banking conference here yesterday.

He said credit growth in the Kingdom remained healthy. “There is still very healthy growth in credit.”

Asked if the Kingdom planned to issue government bonds, Al-Jasser said: “We don’t need a government bond issue.” He said Saudi Arabia still believes the US dollar is the appropriate currency peg at this time and was confident in the US handling of the crisis.

“We have confidence that the US is throwing all the available weapons at the problem to stabilize the financial system,” he said.

“We have not seen anything to make us worry about our ... assets in dollars at this time, but of course this is a crisis in motion and we always have to be prudent and watch what is happening.”

The Kingdom indicated yesterday that it was willing to pay additional capital to the International Monetary Fund (IMF) and was expecting quotas to be increased as the global financial crisis increases demands for aid.

“Only as our share of the capital of the IMF ... if quotas of the IMF are increased and if they increase the quota of Saudi Arabia then we will be happy to contribute,” said Al-Jasser.

Asked if he expected the quota to rise, he said: “Yes, I expect the quotas to be increased ... There are numbers thrown around like doubling the quotas.”

A global economic recession and spreading financial crisis have raised concerns about whether the IMF will have sufficient resources to help emerging market and developing economies cope.

In response, the political chiefs of the Group of 20 leading developed and developing powers are expected to agree on additional capital for the IMF at a summit in London on April 2, but it was unclear which states would pay more or how much more.

The United States, which has indicated it is willing to give up to $100 billion to the IMF, has said there should be $500 billion in new funds on top of $250 billion the IMF already has.

But with advanced economies and the IMF’s largest shareholders, the United States and European nations, in recession, the onus is increasingly on countries with trade surpluses such as China and Saudi Arabia to commit money.

Saudi Arabia has a history of being more generous to the IMF than China.

It now contributes 3.21 percent of total IMF capital through its quota and has 3.16 percent of the total votes, according to the IMF website.