IMF: Financial, Regulatory Reform Agenda Contributed to Accelerating Growth of Saudi Economy

A night view of Riyadh, Saudi Arabia. (Getty Images)
A night view of Riyadh, Saudi Arabia. (Getty Images)
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IMF: Financial, Regulatory Reform Agenda Contributed to Accelerating Growth of Saudi Economy

A night view of Riyadh, Saudi Arabia. (Getty Images)
A night view of Riyadh, Saudi Arabia. (Getty Images)

The International Monetary Fund (IMF) issued on Wednesday a favorable report on Saudi Arabia following the conclusion of the Article IV consultations with the Kingdom. The IMF report confirmed that Saudi Arabia's financial and regulatory reform agenda contributed to accelerating the Saudi economy's growth, containing inflation, and reducing the unemployment rate to its lowest levels ever.

The IMF praised the ongoing economic transformation and efforts to diversify the economy under the Saudi Vision 2030.

The IMF Article IV Consultation report commended the macroeconomic policies and transformational changes implemented by the Kingdom, which contributed to boosting the growth of non-oil activities.

The report noted that Saudi reforms led to rising employment, which now exceeds pre-Covid figures, and that the rate of women's participation in the labor market rose to more than 35%, exceeding the Saudi Vision 2030 target of 30%.

The IMF welcomed Saudi Arabia's measures of conducting long-term financing planning that supports the implementation of the initiatives, programs, and projects of Vision 2030 while mitigating the risks of overheating. It stressed that the Kingdom's fiscal space is strong and that sovereign debt risks are low, adding that the abundance of financial reserves in Saudi Arabia has limited the impact of global and regional challenges.

The IMF report noted that the ongoing reforms in the Kingdom - which include ensuring the effective implementation of regulations, streamlining fees, boosting human capital, increasing the participation of Saudi women in the labor market, facilitating access to land and financing, and improving governance - have contributed to enhancing private sector growth and attracting more foreign direct investment, in addition to the significant progress in the field of digital transformation and artificial intelligence that support these efforts.

The IMF Executive Directors commended Saudi Arabia's leadership role in multilateral fora, including its chairmanship of the International Monetary and Financial Committee (IMFC) in the IMF, which contributed to efforts to address global challenges.

Moreover, the report noted increased activity in the services sector - including transportation, trade, tourism, and finance - as consumption growth reached 5.7%.

The IMF said foreign investment license applications reached record levels in 2023, as they approximately doubled from 2022, including the 330 companies applying for licenses to establish their regional headquarters in the Kingdom.

The report reviewed the banking sector developments in the Kingdom, stressing its strong levels of solvency and liquidity and its flexibility to shocks. The banking sector is on a strong footing and also noted the efficiency of banking mediation according to indicators of profitability, infrastructure, and competitiveness.

The report highlighted the rise in the Saudi Stock Exchange (Tadawul) index of 14.2% in 2023, surpassing the Morgan Stanley Emerging Markets Index of 7%. It noted the progress in the technical environment enabling investment and the licensing of three digital banks. The IMF stressed their contribution to bolstering financial inclusion and competitiveness as these banks are characterized by flexibility and innovation.

Furthermore, it noted the Kingdom's containment of risks resulting from the rapid growth of real estate lending through diverse government support, the strength of banks, full recourse mortgages, and other supportive measures. It highlighted improvements in automating the national assessment matrix for money laundering and terrorist financing risks and boosting the accuracy of data analysis related to risks received from reporting entities, including fintech companies.

The report said the increase in non-oil revenues reflects the effectiveness of existing reforms, which directly contributed to enhancing compliance. It also praised the alignment of customs procedures with international best practices.

The IMF expected the non-oil sector, which includes government activities, to grow by 3.5% in 2024, supported by strong domestic demand. The inflation rate in the Kingdom is probable to remain stable at around 2% over the medium term, supported by the Saudi riyals' peg to the US dollar and local policies consistent with Vision 2030.

The IMF confirmed that the Kingdom has one of the lowest carbon intensity levels among all major producers due to ongoing environmental reforms and its efforts to achieve net zero by 2060. The report noted the Kingdom's success in securing a 30-year purchase agreement for the green hydrogen project in NEOM to achieve its efforts to utilize renewable energy sources.

In order to sequester approximately 44 million tons annually by 2035, the IMF said the Saudi government intends to build one of the world's largest carbon capture and storage plants, which will be operational by 2027, with a capacity of 9 million tons of carbon dioxide annually. It underscored the Kingdom's current efforts to sequester 1.3 million tons of carbon annually through the SABIC Plant and Uthmaniyah Gas Plant Department.



DMDF 2024 Explores Dynamics of Saudi Financial Market

A previous conference organized by the Saudi Financial Academy (Asharq Al-Awsat)
A previous conference organized by the Saudi Financial Academy (Asharq Al-Awsat)
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DMDF 2024 Explores Dynamics of Saudi Financial Market

A previous conference organized by the Saudi Financial Academy (Asharq Al-Awsat)
A previous conference organized by the Saudi Financial Academy (Asharq Al-Awsat)

The Debt Markets and Financial Derivatives Forum (DMDF 2024), set to launch on Sunday in Riyadh, will focus on key principles aimed at exploring the dynamics of the Saudi financial market.
Organized by the Financial Academy, the forum will be held under the patronage of Mohammed El-Kuwaiz, Chairman of the Capital Market Authority and the Board of Trustees of the Financial Academy, with the participation of industry leaders, experts, and specialists from the financial securities sector.
The forum will examine emerging trends and insights from experts and CEOs in the financial sector, contributing to the mission of the Financial Academy, which aims to leverage its resources to provide high-level specialized services that align with Saudi Arabia’s Vision 2030.
Mana bin Mohammed Al-Khamsan, CEO of the Financial Academy, told Asharq Al-Awsat that the forum comes in parallel with the Kingdom’s ongoing advancements, driven by Vision 2030, which seeks to achieve exceptional results across all areas, particularly the economic sector, a cornerstone of the country’s development.
Key Focus Areas
According to Al-Khamsan, the forum will address several major topics in the financial sector, including strategic partnerships with local and international exchanges, such as collaborations with the Saudi Tadawul Group and the Chicago Mercantile Exchange. It will also include partnerships with renowned international organizations like the CFA Institute and the International Capital Market Association (ICMA).
He added that a central focus will be on the debt and derivatives markets, which are expected to experience significant growth in the near future due to recent legal and regulatory reforms. These markets will play a crucial role in diversifying financing sources and improving liquidity.
The CEO of the Financial Academy also noted that the debt and derivatives markets in Saudi Arabia are experiencing rapid growth, and are expected to play a vital role in expanding funding sources and enhancing liquidity over the next few years.
Additionally, the official anticipated a rise in foreign investments in the Saudi financial market due to an improved regulatory environment and increased confidence among international investors.
Future Outlook
According to Al-Khamsan, the forum will shed light on these transformations through panel discussions and dialogues centered on future trends and challenges facing these markets. It will also present innovative solutions to keep pace with global financial market developments.
The forum aims to deliver measurable outcomes by tracking the impact of the Financial Academy’s initiatives on career development within the sector and fostering the principles of continuous professional training across the Kingdom’s financial industry, he underlined.
Al-Khamsan continued that the forum seeks to raise awareness and facilitate the exchange of expertise on modern financial instruments and risk management, while solidifying Saudi Arabia’s position as a leading investment destination regionally and globally. This will be achieved through collaboration with prestigious local and international entities such as the Saudi Tadawul Group, the Chicago Mercantile Exchange, and the CFA Institute.