Riyadh curbs spending to slow inflation

09 May 2008
The Saudi government is attempting to curb public spending in a bid to ease the kingdom's worsening inflation problem, which hit 9.7 per cent in March.

"We are trying to curb spending without effecting investment, because the investment helps to increase the capacity of the economy," says Finance Minister Ibrahim al-Assaf. "I think we have succeeded in not increasing current expenditure.

"The Finance Ministry is working with the other government ministries to monitor spending to curb inflation."

Al-Assaf says the future level of spending growth is difficult to forecast. "This issue is very difficult as there are so many demands [so] I cannot give an exact figure," he explains.

He refused to comment on whether this means spending levels will decline in the kingdom's next budget.

Hamad al-Sayari, governor of the Saudi Arabian Monetary Authority (Sama), central bank, says there are several tough issues to work through.

"Economic policymakers are facing a difficult situation through the adoption of expansionist policies," he says.

The rapid growth in money supply in the kingdom is one of the factors leading to the rising inflation problem.

Al-Assaf also confirms that Saudi Arabia is launching a $5.3bn investment company to invest in local, regional and international opportunities, but says it will not be a sovereign wealth fund.

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