Press Release: IMF Managing Director Rodrigo de Rato's Statement at the Conclusion of his Visit to Saudi Arabia, October 23-24, 2004
October 24, 2004
"It has been a great pleasure to visit Saudi Arabia, where I have had the privilege of meeting with H.R.H. Crown Prince Abdullah and the opportunity to discuss recent developments in the region, current economic policies within the Kingdom and the region as a whole, and the structural reforms initiated by the authorities. Before coming to Riyadh I had the opportunity to attend a meeting of the finance ministers and central bank governors of the Gulf Cooperation Council (GCC) in Jeddah, which gave me insights into the critical role that Saudi Arabia is playing in promoting regional economic integration.
"Crown Prince Abdullah and I exchanged views on the constructive and important role that Saudi Arabia has continued to play in ensuring oil market stability. To meet the unexpected increase in world oil demand, the country has increased oil production to 9.5 million barrels per day in September 2004, well above its OPEC quota, helping to ease the pressure on oil prices. Also, Saudi Arabia has effectively promoted oil price stability through new investments to increase its capacity level to 11 million barrels per day, and enhanced coordination between producers and consumers.
"Saudi Arabia's role in providing economic and financial support to Iraq and other countries in the region, in particular, and developing countries, in general, is commendable and needs to be maintained. Saudi Arabia needs to continue to play a leadership role in easing regional tensions; encouraging adoption of appropriate policies fostering liberalization and integration; and helping Iraq strengthen its financial position and restore its place in the regional economy. The Saudi government's decision to consider debt relief for Iraq would go a long way in improving Iraq's economic viability. The Middle Eastern Technical Assistance Center (METAC)—with financial contributions from the Fund and regional governments—will be opened in Beirut tomorrow, and will contribute to institution building in Iraq and other countries in the region. The Kingdom's support has been critical in achieving substantial progress toward regional integration, including the elimination of most barriers to free movement of goods, services, capital and national labor, and in fostering economic liberalization policies in other non-GCC countries, thus contributing to the sustained growth and stability in the entire area. In this context, I mentioned to Crown Prince Abdullah the Fund's determination to become more fully involved in supporting the reform efforts in the region, including support for regional economic integration, as well as the region's integration with the globalized world economy.
"On the domestic front, Saudi Arabia has witnessed unprecedented economic and social transformation in recent decades. Large official foreign assets have been accumulated, a relatively low private external debt level maintained, and infrastructure significantly modernized. There is a need now to focus on the development of the private sector and, particularly, on the growth of the small- and medium-sized enterprise sector to provide job opportunities for the growing Saudi workforce. The authorities are aware that a sustained increase in private sector-led non-oil economic activity is the key to reduce unemployment, and the authorities have successfully implemented a growth strategy aimed at increasing economic diversification and private sector participation. The strategy should be reinforced and sustained to face the emerging needs and challenges of the Saudi economy.
"In my discussions with the authorities, we agreed that the recent increase in oil revenue has provided a unique opportunity to accelerate the pace of reforms aimed at fostering non-oil growth, diversifying the economy, strengthening fiscal sustainability, and reducing vulnerabilities to oil price shocks, while maintaining monetary and financial stability. I am pleased to observe that the government has rightly decided to use part of this revenue for infrastructure development, including health and education, and to reduce the level of government debt. The IMF will be ready to help in areas of its expertise through constructive policy dialogue and institutional capacity building."