The Economy of Saudi Arabia
Fiscal Position, Currency Peg and Debt
The riyal is pegged to the dollar, the government has low debt, and its budget depends on oil prices and spending choices.
Stability rests on reserves.
Peg
The riyal has been fixed at 3.75 per dollar since 1986.
Breakeven
The oil price the government needs to balance its budget is well above the level of production costs.
Debt
Public debt is moderate but has risen with deficits.
Reserves
Foreign assets held by the central bank and funds protect the peg.
A fixed rate
Because the peg is fixed, the central bank tends to follow US interest rate moves.
Assuming a peg is costless
It limits independent monetary policy.
Key takeaways
- The riyal is fixed to the dollar.
- The budget needs high oil prices.
- Debt has increased.
- Reserves protect the peg.
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