RIYADH: Saudi banks are in good position for offering loans to private sector thanks to their strong capital adequacy ratios, Dr. Muhammad Al-Jasser, Governor of the Saudi Arabian Monetary Agency (SAMA) said Tuesday during Euromoney Saudi Arabia Conference 2011 in the Saudi capital. "Capital adequacy ratios of Saudi banks remain in good position. Banks can introduce credit to private sector without pressuring their general budgets," he said. The ratio of debt to gross domestic product is 10 percent, he added. In a keynote speech, Al-Jasser said the Kingdom's monitary policy is anchored on the pegged exchange rate to the dollar, "so the interest rate risk premia over dollar can be kept low and investors have confidence to commit long-term funds." Saudi Arabia's fiscal policy provides a stable background for investments, he said, adding, "it works on counter-cyclical basis, so that it runs budget surpluses when times are good, as at present, so as to allow for deficit spending to keep the economy on a steady growth track when global demand for oil weakenes." Al-Jasser further said said the Kingdom also has favorable tax rates for businesses (such as a maximum of 20 percent on foreign enterprises) with no capital controls on remittances abroad. The government provides support for investment projects besides developing a supportive legal and arbitration structure. "In summary, Saudi Arabia's economic policy remains cautious and long-term and provides international investors with an ideal backdrop for allocating their capital to the different sectors of the Saudi economy, he noted. Moreover, he said Saudi Arabia has opened up the country's financial sector to foreign financial institutions by granting licenses to foreign commercial and investment banks as well as asset management and insurance companies to optimize the level of competence and coverage in the different financial disciplines. "In terms of regulations of financial institutions, we will continue with the prudent policy which has served us well in the past. We welcome long-term capital inflows in various sectors of the economy to gain mutual benefits from the economic potential of Saudi Arabia," he said. To promote this, the government has adopted an 'open door' policy towards foreign capital which has provided excellent returns to FDI investors, he said.
