Press Release: IMF Managing Director Rodrigo de Rato's Statement at the Conclusion of his Visit to Saudi Arabia
October 18, 2005
Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today after a meeting with H.M. King Abdullah in Jeddah and at the conclusion of his visit to Saudi Arabia:
"It has been a great pleasure to visit Jeddah, Saudi Arabia, where I have had the privilege of meeting with H.M. King Abdullah and congratulating him personally on becoming the sixth ruler of the Kingdom of Saudi Arabia. I also had the opportunity to discuss recent developments in the region, current economic policies within the Kingdom and the region as a whole, and recent progress in the implementation of structural reforms with Minister of Finance Ibrahim Al-Assaf and Governor of the Saudi Arabian Monetary Agency Hamad Al-Sayari. On this visit I once again to attended the 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 continues to play in promoting regional economic integration.
"King Abdullah and I exchanged views on the constructive and important role that Saudi Arabia has continued to play in ensuring oil market stability. The Kingdom has increased oil production to 9.5 million barrels per day (mbd) to ease the pressure on oil prices. The authorities are implementing a more than US$50 billion investment plan to expand oil production capacity to 12.5 mbd by 2009, and they are also committed to further increasing Saudi Arabia's production capacity, since global demand continues to be projected to remain strong. Furthermore, refining bottlenecks are being addressed through the implementation of several multi-billion dollar heavy sour crude refining projects.
"I transmitted to King Abdullah the IMF Executive Board of Directors' appreciation for Saudi Arabia's significant development assistance to low-income countries, including through the HIPC Initiative. The Kingdom's role in providing economic and financial support to Iraq, West Bank and Gaza, and other countries in the region, in particular, and developing countries, in general, is commendable and needs to be maintained. King Abdullah's recent announcement in support of Pakistan's effort in reconstructing its earthquake devastated region is particularly noteworthy. Saudi Arabia's support has been critical in achieving substantial progress toward free trade and regional economic integration, and will be critical in realizing the planned GCC monetary union by 2010. In this context, I mentioned to King Abdullah the Fund's determination to remain fully involved in supporting the reform effort in the region, including support for regional economic integration, as a step toward integration with the globalized world economy. The Middle Eastern Technical Assistance Center (METAC), opened one year ago in Beirut, is already contributing to this progress at the institution building level.
"On the domestic front, the consistent implementation of structural reforms over the past several years has coalesced into a driving force for economic diversification and private sector-led growth, thus creating the basis for increasing employment opportunities for Saudi nationals and enhancing the economy's resilience to oil price shocks. I am confident that the authorities will maintain and, when possible, accelerate the implementation of structural reforms to face emerging domestic challenges, including the need to create employment for a fast growing labor force.
"In my discussions, I commended the Saudi authorities for their decisions to utilize a large part of the fiscal surpluses generated in 2004 and 2005 for undertaking large investment plans to improve Saudi Arabia's much needed physical infrastructure, health care and education systems, and to improve social welfare and municipal services. This investment program will contribute positively to the expansion of private sector activity and economic diversification. This is also an opportune moment for Saudi Arabia to modernize its public sector and make it more efficient. The higher spending, coupled with growth-inducing structural reforms will also help alleviate the global current account imbalances. At the same time, the use of fiscal surpluses for further reducing government debt to around 25 percent of GDP by 2006 will enhance private sector confidence and create fiscal space for sustaining significantly higher social spending in health and education and the infrastructural development program. The IMF will be ready to help in areas of its expertise through constructive policy dialogue."