Saudi Arabia has no plans of changing peg to US dollar

The government has no plans to change Saudi Arabia’s exchange rate, Finance Minister Ibrahim Al-Assaf told a television program early Thursday.
The MBC network’s program was broadcast hours after the Saudi government sold $17.5 billion of bonds, the largest emerging market debt sale ever, in its first international bond sale. 
Analysts, quoted by Reuters, believe the bond will allow Saudi Arabia to slow the drawdown of its foreign assets to pay its bills, which is a focus of recent speculative pressure on the riyal.
Al-Assaf praised the government’s economic plans and reforms drive, saying it had impressed US President Barack Obama among others.
The international debt issue did not include Islamic bonds; Al-Assaf said the government planned to issue sukuk in future as one way to cover its budget deficit.
The bond issue prospectus noted that Saudi Arabia might eventually abandon the peg of its riyal currency to the US dollar, but the minister said that was included for legal reasons and the government has no intention of changing the exchange rate.
The Saudi stock market rose sharply as bank shares rallied after the mammoth international bond sale.
The bond issue was hailed as historic by investors.
Saudi Arabia’s Tadawul All-Share Index gained 2.3 percent, with Samba Financial shares jumping 5.2 percent.
Fitch Ratings recently noted that banks in Saudi Arabia and Qatar are better placed than GCC peers to cope with an eventual deterioration in asset quality brought about by a prolonged period of weak oil prices. 
Commenting to Arab News, Eric Dupont, senior director, financial institutions, gave two key reasons for this assessment. 
Dupont said: “Firstly, an operating environment that provides banks with lots of good lending opportunities and secondly strong loss absorption capacity in the form of excess loan loss reserves, excess capital and earnings generation.”
Speaking on the MBC program, Al-Assaf also said that delays in state payments to construction firms are due to “technical reasons” and the payments will increase in the coming period. He said payments to companies were now “stable” and would rise.
Mohammad Al-Tuwaijri, deputy minister of economy and planning, said Saudi Arabia would have faced bankruptcy in three to four years if it had not imposed austerity policies.

Source: Arab News