1

AHMED A. ALKHOLIFEYE X E C U T I V E D I R E C T O R F O R S A U D I A R A B I A AT T H E

I N T E R N AT I O N A L M O N E TA RY F U N D

Finance and Investment in Saudi Arabia: The Role of

Fiscal Policy

2

Stability

Stable Political System.

Predictable Economic Policies: Consistent, credible, and clear policy messages.

Well-Supervised Financial Sector: Well capitalized and highly profitable banking sector.

Attractive Business Environment.

3

Global Role

Systemic Role of Saudi Arabia: Positive spillover effects of policies pursued by Saudi

Arabia

Ensuring sustainable supply and stability of energy markets.

The G20: Framing the new path for strong, sustainable, and

balanced growth.

2005-2009 2009 2010

Imports (% of GDP) 20.0 23.0 21.6

Remittances (bln. SR) 340.7 94.4 98.2

4

Growth

Real GDP*

Non-Oil GDP

2009 2010 2011

Saudi Arabia 0.1 4.1 6.5

World Output -0.7 5.1 4.0

Advanced Economies -3.7 3.1 1.6

Emerging and Developing Economies

2.8 7.3 6.4

*IMF World Economic Outlook, Oct 2011

2005-2009 2010 2011

Saudi Arabia 4.6 4.9 5.4

GCC 3.6 4.5 5.3

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Fiscal Policy

Consistent & countercyclical

Priorities:

Investment in infrastructure.

Investment in human capital

Competitiveness:

Enhancing productivity of physical and human capital

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

50

100

150

200

250

0

50

100

150

200

250

Hydrocarbon Revenue

Government Expenditure

Government Hydrocarbon Revenue and Total Expenditure, 1980–2010

(In U.S. dollar billions)

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Government Spending

Education and Training

41%

Health and social Affairs19%

Municipali-ties6%

Transport & Tele-

com7%

Water, Agricul-ture, and Infrastruc-

ture14%

Special-ized

Credit Institu-tions 13%

2011 Appropriations* for the main de-velopment sectors

*Projections

2005 2006 2007 2008 2009 2010 2011

346

393

466

520

597626

580*

Government expenditures (Billion SR)

*Projections

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Promotion of Finance

•finances large scale government and private projects

PIF (1971):

•finances real estate sector

REDF (1974):

•finances industrial projects

SIDF (1974):

•provides interest-free loans for small and emerging businesses and professions

SCB (1971):

•finances farmers and agricultural projects

ADF (1962):

•Extends credit to private sector entities for the purposes of establishing development projects. (SR 7.0 Billion)

Direct Loan Program (1971):

ADF SCB PIF SIDF REDF 5 yr total

0

20

40

60

80

100

120

2.2%

18.7%

37.8%

19.9% 20.9%

117.5 (bil SR)

Total loans and share of SCIs during 2006-2010

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Conclusion

Attractive business environment: Promising growth potentials Low tax rate (max. 20%) and business friendly tax

administration. Large economic size Supportive economic policy including good finance

terms