Riyadh- Saudi Arabia confirmed its commitment to keeping the riyal pegged to the U.S. dollar to support its fixed exchange rate policy, according to an official statement issued on Friday.
The current exchange rate is fixed at SAR3.75 for each one dollar, as to further sustain the Kingdom’s financial stability.
Saudi Arabia’s Central Bank Governor Ahmed al-Kholifey reiterated on Friday that the kingdom was committed to keeping the riyal pegged to the U.S. dollar and that it had “sufficient tools” to support its fixed exchange rate policy.
“The governor of the Saudi Arabian Monetary Agency said the organization reiterates its ongoing commitment to the Riyal’s exchange rate policy, currently at 3.75 against the U.S. dollar,” the Central Bank said in a statement on its website.
“Speculation that occurs from time to time about the riyal in the forwards market is inaccurate. The organization has stressed on various occasions its continued commitment to the current riyal policy and has sufficient tools to support the exchange rate of the riyal.
“The fixed exchange rate policy has been followed for more than three decades and is an important policy supporting the kingdom’s economy.”
Moreover, information procured by Asharq Al-Awsat newspaper says that the Saudi Arabian Monetary Agency still relies on the Kingdom’s stable credit.
Commenting on pegging the riyal to the dollar, economic analyst Dr. Ghanim al-Salim told Asharq Al-Awsat that the decision was a purely economic and sensible one, especially as the dollar opening at increasing rates, which translates into the riyal also gaining value.
Moody’s Investors Service had downgraded the Government of Saudi Arabia’s long-term issuer ratings to A1 from Aa3 and assigned a stable outlook.
According to Moody’s, Saudi Arabia’s credit profile remains very strong by comparison with the majority of Moody’s-rated sovereigns.
The holding also lauded the government’s ambitious and comprehensive plans to address the oil-market shock by diversifying its economic and fiscal base.
According to Moody’s, the kingdom’s stable outlook indicates that, at this lower rating level, risks to Saudi Arabia’s credit profile are broadly balanced.
In the absence of further fiscal and economic reform, the pressures on the government’s balance sheet would continue to rise, although this is not currently Moody’s expected outcome, read the report.