Saudi Arabia ahead of US, EU and UK when it comes to Basel IV compliance

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Updated 25 February 2024
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Saudi Arabia ahead of US, EU and UK when it comes to Basel IV compliance

  • Basel IV regulations mandate that banks maintain specific leverage ratios and designated reserve capital

RIYADH: Saudi Arabia’s dedication to financial stability has been underlined by figures from the Kingdom’s central bank showing its capital adequacy ratio stands at 19.5 percent – far above the 8 percent minimum requirement introduced in the wake of the 2008 economic crisis.

This position comes as Saudi Arabia is one of the few countries to be fully compliant with Basel IV regulations, which mandate that banks maintain specific leverage ratios and designated reserve capital.
This adherence to global standards contrasts with the varied timelines seen worldwide for Basel IV implementation.
While the EU, the UK, and Switzerland are navigating finalization processes, the US is yet to commence consultations on these critical reforms, which remain a top priority for regulatory bodies amidst recent bank failures.
Although Saudi Arabia’s ratio falls slightly below the 20 percent recorded in the same period in 2022, it still comfortably exceeds the Basel III minimum requirement of 8 percent, encompassing both Tier 1 and Tier 2 capital.
Basel III is a set of international banking regulations developed by the Bank for International Settlements to promote stability in the international financial system. It was introduced following the 2008 global financial crisis to improve the banks’ ability to handle any shocks from financial stress and strengthen both their transparency and their disclosure.
Basel III builds on the previous accords, Basel I and Basel II, and is part of a process to improve regulation in the banking industry. Basel IV, or 3.1, was introduced in 2017 and is the final reform of Basel III. It focuses on strengthening the banking sector for increased resilience against future crises. The target timelines for implementation of the final reforms vary significantly worldwide.
Originally scheduled to take effect on Jan. 1, 2022, the implementation of Basel IV was postponed by 12 months due to the COVID-19 pandemic, with transitional dates being revised and varies among countries.
The Basel IV proposals seek to restore credibility in the calculation of risk-weighted assets and improve the comparability of banks’ capital ratios.
One of the most significant risks faced by traditional banks is credit risk, which involves the uncertainty that loans, the primary assets of a bank, may not be repaid, leading to unexpected losses.
To mitigate this risk, regulators impose a regulatory capital intended to absorb losses in times of credit default. The absence of sufficient capital can lead to a bank collapse, posing not only a threat to the individual bank but also to the broader financial system.

In a February 2023 report, Fitch Ratings highlighted that Saudi Arabia, along with Australia, Canada, Indonesia, and South Korea, was among the few jurisdictions that successfully met the globally agreed official Basel IV implementation date in January 2023. The report also emphasized Saudi Arabia’s status as one of the most sophisticated and conservative regulators in the Middle East and Africa.
Under these regulations, banks are required to measure their risk-weighted assets in a calculation that involves assigning different risk weights to various categories of assets based on their perceived riskiness. The goal is to reflect the varying degrees of credit risk associated with different types of assets in a bank’s portfolio.
Banks are then required to assign regulatory capital to ensure they have a sufficient buffer to absorb potential losses, particularly during economic downturns or financial crises. The capital requirements are usually expressed as a percentage of a bank’s risk-weighted assets.

The key capital types that are allowed under Basel III are divided into two main tiers: Tier 1 which is the highest quality capital and includes common equity, retained earnings and other comprehensive income, in addition to Tier 2, other instruments with specific loss-absorption features.
Within the banks’ capital adequacy calculations under the Basel III framework, another significant ratio that banks need to comply with is the regulatory Tier 1 capital, which should be maintained at a minimum 6 percent of RWA to safeguard their financial strength.
In the context of Saudi banks, this regulatory Tier 1 capital reached 16 percent of their RWA, indicating a robust position that comfortably surpasses the Basel III requirement for a minimum Tier 1 capital of 6 percent.
Furthermore, this capital encompasses the capital conservation buffer – a supplementary measure under Basel III intended to absorb losses during economic stress, fixed at 2.5 percent of total risk-weighted assets.
The primary purpose of the capital conservation buffer is to build an additional layer of capital that banks can draw upon in times of financial difficulty.
It aims to promote the conservation of capital and prevent banks from depleting their capital levels to a point where they may be at risk of financial distress.
Importantly, this buffer must be fulfilled using Common Equity Tier 1 exclusively, and it is positioned above the regulatory minimum capital requirement of 8 percent. This elevates the overall required minimum ratio to 10.5 percent.

FASTFACT

In a February 2023 report, Fitch Ratings highlighted that Saudi Arabia, along with Australia, Canada, Indonesia, and South Korea, was among the few jurisdictions that successfully met the globally agreed official Basel IV implementation date in January 2023.

If the minimum buffer requirements are breached, capital distribution constraints will be imposed on the bank.
Tier 1 capital is categorized as going concern, signifying its immediate capacity to absorb losses as soon as they arise. On the other hand, Tier 2, the second type of capital considered in calculating the bank’s capital adequacy ratio, encompasses supplementary capital and operates as a gone concern, absorbing losses before affecting depositors and general creditors.
Total available regulatory capital is the sum of these two elements - Tier 1 and Tier 2. Both categories have distinct criteria that capital instruments must meet before being considered. Banks must adhere to specified minimum levels of Common Equity Tier 1, Tier 1, and total capital, with each level expressed as a percentage of risk-weighted assets.
The Basel IV proposals seek to restore credibility in the calculation of risk-weighted assets and improve the comparability of banks’ capital ratios.
Fitch Ratings said this move is expected to benefit banks with significant exposures to residential and commercial mortgage loans, as well as high-quality project finance in Saudi Arabia. The capital ratios of these banks are expected to improve, thanks to more detailed risk-weightings that are generally lower than those observed under the previous regime.
However, according to the agency, banks involved in land acquisition, construction, development, financial guarantees and equities will face increased capital requirements.
Retail-focused banks are set to benefit from improved capital ratios with lower risk-weightings, particularly in residential mortgage loans. SAMA’s cap on the loan-to-value ratio at 90 percent will lead to reduced risk-weights, ranging from 20 percent to 40 percent, from 50 percent previously.
The overall capital ratio for the Saudi banking sector will remain mostly unchanged as indicated by a parallel run conducted by SAMA in 2022.


Saudi Arabia leading region’s transformative journey 

Updated 20 April 2024
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Saudi Arabia leading region’s transformative journey 

  • SVC makes significant strides in shaping private investment landscape

CAIRO: A wave of venture capital funding has washed over the Middle East and North Africa region, prompting transformative change in the entrepreneurial landscape.

Saudi Arabia’s government is leading the shift through a subsidiary of the SME Bank, part of the National Development Fund.  

The Kingdom’s Saudi Venture Capital has made significant strides in shaping the private investment landscape, deploying finance across 40 investment funds and over 700 startups and small and medium-sized enterprises.  

This was highlighted in the latest Impact Report issued by SVC, which detailed its contributions since its inception in 2018. 

The document revealed that SVC’s total investments have reached SR2.6 billion ($693.1 million), with the overall impact of these, including partner commitments, estimated at around SR13.6 billion.  

These investments span various sectors critical to economic diversification, such as e-commerce, fintech, healthcare, educational technologies, transportation, and logistics. 

“SVC plays a crucial part in stimulating the private VC investment to sustain and foster the steady growth of the VC ecosystem in the Kingdom,” Nabeel Koshak, CEO of SVC, said.  

“SVC’s strategy, since its inception in 2018, contributed to increasing the number of investors in Saudi startups, encouraging existing and new financial companies to establish VC funds, and motivating regional and global funds to invest in Saudi startups,” Koshak stated. 

“Accordingly, the funding deployed into Saudi Arabian startups grew 21 times to a record-high of $1.4 billion in 2023 versus $65 million in 2018, the year SVC was launched,” he added. 

Significantly, SVC’s strategic initiatives have positioned Saudi Arabia as a leader in venture investments within the MENA for the first time in 2023.  

This milestone reflects the broader economic and financial sector evolution under Saudi Vision 2030, aimed at enhancing the national economy. 

Saudi Arabia’s Penny Software closes undisclosed pre-series A round 

Closing its pre-series A funding round, Saudi Arabia’s Penny Software raised an undisclosed sum from Iliad Partners, joined by GSI and US-based Knollwood Investments, alongside existing investors such as Dallah Investment, Hambro Perks Oryx Fund, Class 5 Global, Altuwajiri family fund, and strategic angel investors.  

Founded in 2020 by Iyad Al-Dalooj, Majid Al-Dalooj, and Mohamad Ibrahim, Penny Software is a business to business Software-as-a-Service procurement startup that digitizes the entire source-to-pay process, thereby enhancing spend efficiency, governance, and compliance. 

“This investment from Iliad Partners, alongside the continued support from our existing and new investors, represents a significant vote of confidence in Penny Software’s vision and our team’s ability to execute,” Iyad Al-Dalooj, the CEO, said. 

“We are excited to leverage this partnership to scale our operations, enhance our product offering, and solidify our position as a leader in the procurement software industry. The future of procurement is here, and Penny Software is at the forefront of this transformation,” he added. 

This new capital infusion is poised to fuel Penny’s ambitions for regional and global expansion.  

This follows a successful $5 million seed funding round in 2021, led by Outliers Venture Capital with participation from Wamda, Shorooq Partners, Hambro Perks ORYX Fund, Class 5 Global, and strategic angel investors.  

Penny Software aims to leverage this investment to further enhance its platform capabilities and broaden its market reach, reinforcing its position in the competitive SaaS industry. 

The company claims that it is set to manage a gross transaction value of over $1 billion this year, and ease procurement for thousands of companies globally. 

“Saudi Arabia is an economy that is undergoing a major transformation in which technology is playing a key role. This is our first investment in the Kingdom, and we plan to invest a significant portion of our fund in this market, supporting strong founders on their journey from the pre-series A stage and onwards,” Christos Mastoras, founder and managing partner of Iliad Partners, stated   

UAE’s DocsInBox closes $500k in a funding round 

UAE’s e-invoicing and procurement startup DocsInBox closed a $500,000 funding round from angel investors to boost its presence. 

Founded by serial entrepreneurs Leonid Dovbenko and Stanislav Seleznev,  DocsInBox significantly streamlines invoicing and procurement processes, saving up to 1 million hours each month, the company claimed.  

The platform enables purchasing agents to place orders in just three clicks, while accountants can complete tasks in 13 seconds that previously took 300 seconds.  

By automating procurement, DocsInBox reduces manual labor by 15 percent, operational costs by 5 percent, and food costs by 8 percent.  

UAE’s U-topia secures $850k in funding round 

UAE-based Web3 services provider U-topia has secured $850,000 in funding from GDA Capital. 

Established in 2021 by Jérémy Mahieu and Nicolas Prévost, U-topia operates as a Web3 entertainment company that merges global intellectual property licensing in GameFi, artificial intelligence music, and video entertainment supported by non-fungible token provenance.  

The newly acquired investment is earmarked for the development of advanced features and technologies on the U-topia platform, aiming to enhance its offerings in the dynamic Web3 landscape. 

Nigeria’s VC firm Verod-Kepple Africa Ventures closes $60m fund 

Nigeria-based VC firm Verod-Kepple Africa Ventures has concluded a final close of $60 million for its pan-African VC fund, led by existing investors and new investors, including SCM Capital from Nigeria and institutional investors from Japan, including Taiyo Holdings and C2C Global Education Japan. 

Formed in 2021 as a joint venture between Kepple Africa Ventures and Verod Holdings, VKAV is led by partners Satoshi Shinada, Ryosuke Yamawaki, and Ory Okolloh. 

The fund aims to bridge the funding gap for African startups, especially for companies moving to series A and B stages. 

Egypt’s VC firm Beltone teams up with UAE’s CI Venture to manage a $30m fund 

Egypt’s Beltone Venture Capital, under Beltone Holding, has teamed up with CI Venture Capital from UAE’s Citadel International Holdings to manage a $30 million fund aimed at nurturing fast-growing startups.  

This collaborative fund is set to invest in pre-seed and seed funding rounds of innovative tech startups across the MENA region while also continuing to support standout performers within its existing portfolio. 

In recent months, the fund has actively begun deploying capital, finalizing investments in several startups, including Bosta, Trella, Qlub, and ariika.  
 


World Bank chooses Saudi Arabia as location for new knowledge hub

Updated 20 April 2024
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World Bank chooses Saudi Arabia as location for new knowledge hub

  • Hub will enable Kingdom to assist other countries looking to boost economic standings

WASHINGTON DC: A knowledge hub will be established in Saudi Arabia in a partnership between the Kingdom’s National Competitiveness Center and the World Bank Group, it was announced in Washington DC on Friday.

The new knowledge center will serve as a hub for sharing Saudi Arabia’s experience of economic reform and enhancing regional and global competitiveness collaborations with other countries looking to boost their economic standings, a statement released by the NCC said.

Saudi Minister of Commerce Majid Al-Qasabi, who is also chairman of the NCC board of directors, said the deal was testament to the significant progress made by the Kingdom in global competitiveness reports and indicators, which had been made possible by the leadership of Crown Prince Mohammed bin Salman.

Saudi ambassador to the US, Princess Reema bint Bandar, the President of the World Bank Group Ajay Banga and the Chief Economist of the World Bank Group Intermit Gill also attended the announcement event.

The hub, currently in the preparatory stage, will be overseen by a founding committee including the ministries of finance, economy, and planning, alongside several relevant government agencies.


Investment opportunities in Saudi Arabia abound beyond major cities 

Updated 20 April 2024
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Investment opportunities in Saudi Arabia abound beyond major cities 

  • Decentralized development shifts attention away from the cities to the lesser-explored corners of the Kingdom

JEDDAH: In the heart of Saudi Arabia, amidst the towering skylines of Riyadh, Jeddah and Dammam that have long symbolized the nation’s economic strength, a new narrative is taking shape. It is a story of decentralized development, where attention is shifting away from the bright lights of the cities to the lesser-explored corners of the Kingdom.
In recent years, there has been a noticeable pull towards the untapped potential of smaller towns and regional municipalities, captivating the interest of investors, entrepreneurs, and policymakers alike.
This shift marks a departure from the traditional belief that growth is solely concentrated in urban centers, signaling a fresh era of exploration and diversification.
As Saudi Arabia steers towards a more resilient and inclusive economy, the growing fascination with these areas, which had not received much attention before Saudi Vision 2030 was announced, underscores the evolving priorities and ambitions guiding the Kingdom’s economic trajectory.
Talat Hafiz, a renowned economist, told Arab News that the focus on developing small towns, helps to limit internal movement of people to urban and large cities to seek job opportunities and look for better living.
“It also supports the government efforts in reaching comprehensive sustainable economic development,” he said.

Economist Talat Hafiz

Commenting on what sectors or industries within these smaller towns are experiencing the most significant growth, Hafiz said that the case differs from one place to another as each city has its own economic characteristics and competitive advantages.
“In some towns, tourism is the most competitive advantage while the industrial sector is more competitive and advantageous in the others,” he pointed out.
The economist noted that Saudi Vision 2030 has fostered the capabilities of local planning decentralization, which would allow municipalities to undertake tasks that boost the city in collaboration with the private sector.
He added that that, as a result, several small towns and cities have been upgraded to the level of urban cities which in turn has improved the infrastructure and public services.
“Boosting the capability of small towns is coupled with the development of universities and medical and educational facilities, which in turn has attracted investment, created job opportunities and limited internal immigration,” Hafiz said.
Nasser Al-Qaraawi, another economist, said that Saudi Vision 2030 took into consideration the need to alleviate congestion within major cities due to the excessive focus on them.


He added that the excessive population density in these major cities, compared to other cities, has made life difficult, noting that ineffective urban planning strategies contributed to the overcrowding, especially by young people seeking job opportunities and education.
“This was followed by the aftermath of the stock market crisis in 2006,” he told Arab News.
Al-Qaraawi added that when the 2030 plan was announced, developing areas surrounding the larger cities and less developed regions were given the opportunity for growth.
However, he further said, these regions unfortunately vary in success as some municipalities are unable to perform to their full potential due to bureaucratic hurdles.
Al-Qaraawi recommended restructuring the municipalities, as development indicators highlight the pressing need to catch up and enact meaningful change within these local governments to fulfill the state’s goals and meet the citizens’ aspirations.
Investment opportunities in smaller municipalities include the following:

Diverse investment opportunities in EP municipality 

Eastern Province’s urban administration has unveiled 362 diverse investment opportunities, spanning cities and governorates.

Covering over 20,000 assets across 116 million sq. m., the initiative includes sectors like infrastructure, transportation and tourism. Investors were urged to capitalize on incentives like contractual extensions and exemption periods.

These investment portfolios serve as a database for significant investment growth in the region, according to the Saudi Press Agency.

Jazan as key investment hub, coffee capital
With its significant port and refinery, Jazan has experienced a surge in investment, driven by rapid infrastructure expansion. The economic zone aims to attract SR11 billion ($2.93 billion) in foreign investments by 2040, leveraging its untapped mining reserves. The region is poised to become a hub for the mining sector, projected to be Saudi Arabia's third pillar of industry.
Additionally, Jazan’s integrated economic center is expected to generate 17,000 direct jobs by 2040 and contribute significantly to the gross domestic product.
During the Cityscape Global Exhibition, held in Riyadh from Sept. 12-13 last year, Jazan Municipality announced 5,000 investment opportunities to be launched from 2023 to 2027, with a total value exceeding SR5 billion.
Among the most prominent developmental and investment projects presented were the Jazan Gateway, Water Park City, Al-Wadi Park, and Jazan Private University as well as Jazan Private Medical City.
On the other hand, the region’s renowned coffee industry adds to its cultural heritage, with plans for the International Saudi Coffee Exhibition to support local farming initiatives and transform Jazan into a global trade center.
The Sustainable Rural Agricultural Development Program has provided more than SR155 million in support to the coffee sector, benefiting over 3,000 farmers. The Ministry of Environment, Water, and Agriculture, in collaboration with the private sector, is implementing various projects, including opportunities for coffee cultivation.

Northern Borders region attracts more investors 

The Kingdom seeks to establish a logistics zone in Arar, where investors will be granted land plots, according to Minister of Commerce Majid Al-Qasabi, who made the statement during his speech at the Northern Borders Investment Forum, held in November 2023.  
According to a release issued by the Arar Municipality in January 2024, Saudi Arabia’s Northern Borders region saw a 58.3 percent growth in factory numbers in the third quarter of 2023, with total investment hitting SR74.3 billion. 
The statement added that the area, driven by a strategic regional development office, attracted increased corporate spending for business setups during that period, rising from SR73.9 billion in the third quarter of 2023.
In February 2023, Crown Prince Mohammed bin Salman announced the establishment of the Strategic Office for the Development of the Northern Borders region to enhance the quality of life in the area. 

Asir region to exploit huge tourism potential

In September 2021, the crown prince unveiled a SR50 billion tourism strategy for Asir, aiming to attract over 10 million visitors by 2030. Dubbed “The Arabian Highland,” the plan entails comprehensive development, focusing on cultural and natural assets to establish Asir as a year-round destination.

Projects include enhancing tourist attractions on Asir’s mountains, leveraging the region’s rich culture and heritage for social and economic growth. The strategy taps into Asir’s tourism potential, emphasizing geographical diversity and modernizing infrastructure.
In October 2023, the crown prince announced a master plan for the new Abha International Airport, increasing capacity to accommodate 13 million passengers annually and enhancing air connectivity to 250 destinations, aligning with Saudi Vision 2030.
In the same month, he launched Ardara Co. to develop the Abha Valley project, contributing to Saudi Arabia’s National Tourism Strategy to position the Kingdom as a global tourism hub by 2030. These initiatives create opportunities across sectors like hospitality, agriculture, and entertainment, bolstering private sector growth. 

Taif attracts investments of over SR11 billion

Investment agreements exceeding SR11 billion were announced on the first day of the Taif Investment Forum, held in November 2023, according to the Saudi Press Agency. 
Under the theme “Invest in Taif,” the three-day forum saw active participation from industry leaders in the UK, China and South Korea. Several high-ranking officials from Saudi government agencies and the private sector also attended. 
Sultan Al-Saadoun, the general supervisor of the forum, emphasized that the investment agreements are the result of partnerships between the public and private sectors in over 27 projects.
He added that these projects will create more than 10,000 job opportunities for the people of Taif of both genders.  
Ghazi Al-Quthami, president of the city’s Chamber of Commerce and Industry, underscored Taif’s potential for investments in various sectors, such as tourism, agriculture, industry, and healthcare.
He added that the chamber is actively collaborating with relevant entities to expand investment opportunities in the city. 

Al-Jouf provides 700 investment opportunities in 2023

The municipality of the northern region of Al-Jouf, which is home to the Sakaka solar power plant, announced in February 2024 it had introduced more than 700 opportunities in the municipal sector of the region during 2023 through the ‘Furas’ municipal investment portal.
The region’s mayor, Atef Al-Shara’an, emphasized the municipality’s commitment to presenting the available investment opportunities to investors in accordance with the plans of the Ministry of Municipal and Rural Affairs and Housing, and the goals of Vision 2030 of the Kingdom, according to SPA.

Al-Shara’an added that the investment opportunities presented during the past year varied between major, medium, small, and temporary opportunities in all commercial, recreational and tourist as well as sports, service, seasonal events, and other fields.
Recently, the region’s mayoralty announced the bid opening for eight commercial and residential investment opportunities for national investors and institutions at Al-Esawia sub-municipality. The bid evaluation meeting is scheduled for April 15.

Yanbu emerges as entertainment hub 
A contract worth SR1.1 billion has been granted to build a new entertainment hub in Yanbu to boost economic diversification in Saudi Arabia.
The contract was awarded by Public Investment Fund subsidiary Saudi Entertainment Ventures, also known as SEVEN, to a joint venture between Al Bawani Co. and UCC Saudi, according to a press release.
The statement emphasized that the entertainment hub will be located along the seafront promenade on Al Nawras Island, aiming to greatly enhance the city’s local entertainment scene.
In a press statement, issued in September 2023, SEVEN said that the company is investing more than SR50 billion to build 21 entertainment destinations across Saudi Arabia.  
The company has earlier announced that it had already begun construction works on its entertainment destinations in the Al Hamra district of Riyadh and Tabuk. 

Buraidah Municipality unveils 28 investments opportunities

The Qassim region, home to Buraidah city, stands as a province abundant in natural and agricultural resources. Notably, it hosts the Middle East’s only bauxite mine, yielding approximately 5 million tonnes of ore and contributing to the Kingdom’s aluminum production of 1.8 million tonnes in 2020.
The Buraidah Municipality has recently unveiled 28 investment opportunities for the first quarter of 2024.
These opportunities encompass a wide range of sectors, from commercial, health, and tourism activities to transportation, construction, and entertainment projects. Additionally, investors can explore prospects in agriculture, education, and other sectors, promising diverse avenues for growth and development.

It is apparent that, by tapping into regional potential and spreading development initiatives, the Kingdom aims to reduce reliance on oil revenues, stimulate job creation, and foster widespread prosperity, in line with the goals of Saudi Vision 2030.
 


IMF, World Bank steering committee stresses accountability as reforms advance

Updated 20 April 2024
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IMF, World Bank steering committee stresses accountability as reforms advance

  • Governors of the institutions urged the World Bank to continue to bolster global and regional partnerships

WASHINGTON DC: The steering committee for both International Monetary Fund and the World Bank on Saturday emphasized the need for broader accountability as the institutions implemented reforms to help countries grapple with climate change and other shocks.

“We must hold ourselves accountable more broadly as we become a better and bigger bank,” said Mohammed bin Hadi Al Husseini, the United Arab Emirates’ minister of state for finance, who heads the joint Development Committee this year.

Al-Husseini issued a chair’s statement, rather than a communique, amid disagreements over wars in the Middle East and Ukraine, but referenced economic risks posed by the conflicts. The statement came as this week’s meetings of the IMF and World Bank drew to a close.

Governors of the institutions urged the World Bank to continue to bolster global and regional partnerships, and asked its management to push ahead with country engagement reforms and enhanced country diagnostics.

They also encouraged further collaboration between the World Bank and IMF to help countries mobilize more revenues at home, and on issues such as climate change and pandemic preparedness, as well as debt sustainability.


Saudi chair of IMFC acknowledges impact of global crises, says they should be discussed in other forums

Updated 20 April 2024
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Saudi chair of IMFC acknowledges impact of global crises, says they should be discussed in other forums

  • Thanks expressed to outgoing chair Nadia Calvino for her leadership

RIYADH: The International Monetary and Financial Committee on Friday held its biannual meeting in Washington DC to discuss the global macroeconomic and financial impact of current conflicts.

The IMFC members focused on the war in Ukraine, the humanitarian crisis in Gaza, and shipping disruptions in the Red Sea, said Mohammed Al-Jadaan, the Saudi minister of finance and the body’s chair.

Al-Jadaan said IMFC members acknowledged that the crises had significant impacts on the global economy, but added that the body was not the forum to resolve geopolitical and security issues, and that they should be discussed in other forums.

He said: “The IMFC’s role is to advise and report on the supervision and management of the international monetary and financial system. This includes responses to events that may disrupt the system.

“Of course, the world and the IMF (International Monetary Fund) itself have faced multiple global disruptions over the last few years. Prospects are improving, which is very positive, but numerous challenges remain, and we need to be vigilant and ready to address them. Today’s era must not be of war and conflict.”

The Saudi minister chairs the IMFC, the policy advisory body to the IMF’s board of governors, and was speaking during the committee’s gathering at the Spring Meetings of the IMF and World Bank.

The IMFC thanked outgoing chair Nadia Calvino for her leadership and welcomed Al-Jadaan as her replacement.

Al-Jadaan said: “A soft landing for the global economy appears to be drawing closer.

“Economic activity has proved more resilient than expected in many parts of the world, though it continues to diverge across countries.”

But as ongoing conflicts continue to burden the global economy, this has led to some weak growth prospects in the medium term.

Al-Jadaan said: “Even though inflation has fallen in most regions, owing to the unwinding of supply shocks and the effects of tight monetary policy, its persistence warrants caution.

“While risks to the outlook are now broadly balanced, downside risks remain, hinging on the near-term paths for inflation and interest rates, asset prices and financial stability, fiscal policy actions, as well as geopolitical developments.”

Other pressing challenges were also affecting the global economy, such as climate change, elevated debt vulnerabilities, rising inequality, and the risk of geoeconomic fragmentation, he added.

The Saudi minister said: “Against this background, our policy priorities are to achieve price stability, strengthen fiscal sustainability, and safeguard financial stability, while promoting inclusive and sustainable growth.

“We will proceed with rebuilding fiscal buffers, carefully tailoring actions to country-specific circumstances, while protecting the most vulnerable and growth-enhancing investment.”

Al-Jadaan said central banks remained strongly committed to achieving price stability and would continue to communicate policy objectives to help limit negative spillovers.

He added: “We continue working to address data, supervisory, and regulatory gaps in the financial sector, especially nonbank financial institutions, where relevant, and stand ready to deploy macroprudential policy tools to mitigate systemic risks.”

He said the IMF stresses the importance of international cooperation to improve the resilience of the global economy and the international monetary system, adding that members will “act collectively, as appropriate, to support climate and digital transitions, including artificial intelligence, while accounting for country-specific circumstances.”

During the meeting, which was held in the presence of the IMF’s Managing Director Kristalina Georgieva, Al-Jadaan reiterated the IMF’s commitments on exchange rates, addressing excessive global imbalances, governance, and avoiding protectionist measures.

He said: “We will also continue working together to strengthen the global financial safety net, address global debt vulnerabilities (and support) vulnerable countries as they undertake reforms to tackle their vulnerabilities and address their financing needs.”

Al-Jadaan also said the IMF would continue its “critical and catalytic role in providing financial assistance to help members address their balance of payments problems and achieve economic stability and inclusive growth.”

He added that the body was looking to welcome a new 25th chair on the IMF’s Executive Board for Sub-Saharan Africa in November to improve representation and the overall balance of regional representation.

He said: “We support the IMF’s strengthened efforts to attract and develop talent to support existing and new priority areas, and to further improve staff diversity and inclusion, responding to the specific challenges identified in the FY2022-FY2023 Diversity and Inclusion Report.”

He also announced that the next IMFC 24 members’ meeting was expected to be held in October. Representatives usually meet twice a year, at the Bank-Fund Annual and Spring Meetings, to outline the proposed agenda for the IMF’s work program.