Saudi Arabia's less-publicized role in the current financial crisis afflicting the US and some European economies has become a source of query to many readers. Scattered information from large sources, economic jargon idiosyncrasies and tardiness on the part of Saudi columnists added much blur to a misty scene. In an exclusive interview with the Saudi Gazette, Saudi Arabia's Finance Minister Ibrahim Al-Assaf clarified a number of issues delineating Saudi Arabia's global role as a world creditor, its influence within the G20 and the IMF and the spectrum of how outward institutional investments are a source of return as well as an added support to Saudi Arabia's national reserves. “At the outset, I would like to clarify that information on the shares of IMF member countries including Saudi Arabia's, the fund's lending programs and its basic system are all explained and are always published in the fund's official reports. In addition, the figures on Saudi Arabia's share in the fund are published in the periodical official reports of Saudi Arabia, including bulletins of the Saudi Arabian Monetary Agency (SAMA), as the components of the shares are part of the Saudi Arabia's reserves.” He pointed out “that the IMF is a multilateral institution and serves as a forum for economic cooperation that contributes to global economic growth, stability of exchange rates and providing financing for countries suffering from problems in their balance of payments. The shares of member countries are allocated according to a number of factors including the size of the economy and the degree of commercial openness. Saudi Arabia's stake in the IMF reaches 2.8 percent at present at a value estimated at 6,985 million special rights units (6.985 billion units) with each special drawing right unit worth SR5.89.” The special drawing right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on Aug.28 and a special allocation on Sept. 9, 2009, the amount of SDRs increased from SDR 21.4 billion to around SDR204 billion (equivalent to about $328.3 billion, converted using the rate of Aug.31, 2011). As known, countries are strongly vying to obtain greater voting power via shares in the fund so as to participate in making important decisions in the global economic policies. Undoubtedly, Saudi Arabia's economic importance and its role in the world economy have granted it an important status in the fund and in other international institutions and forums like the World Bank, G20 and World Financial Stability Council. The opposite is also true; for, Saudi Arabia also has a special seat in the Council of Executive Directors and the Monetary and Financial Ministerial Committee of the IMF which enables it to influence decisions adopted by the fund to serve its interests and bolster its international position. It is noteworthy that Saudi Arabia joined the IMF as a member in 1957 following the financial crisis it faced at that time and it obtained technical assistance from the IMF to overcome its crisis. The two main sources for financing in the IMF are: First, through the fund's capital represented by the member countries' shares. Second, through the bilateral and multilateral lending arrangements between the fund and member countries. As to the countries contributing in the arrangements for lending resources, including Saudi Arabia, these resources are an investment for them where they obtain good returns enabling them to diversify their reserves and investment portfolios. The additional advantage for these resources is being in their liquidity, which permits a lending member to liquefy when there is need for it. He emphasized that lending resources come with high guarantees, as the fund's debts are excellent debts and all members are considered guarantors, aside from the fund's gold reserves. Furthermore, it is noteworthy that the lending arrangements have been in force since the setting up of the fund. So far no country has failed to pay back its debts owed; since a non-paying member would not be able to obtain financing from other source. On the other hand, the fund has never been late in paying commitments to the countries that use its financial resources whether through its capital or bilateral and multilateral parties. Saudi Arabia also entered into multilateral lending agreements in the seventies; these loans have been paid back in full with good returns. Lending programs provided by the fund have additional advantage of putting a limit to the spread of the financial crisis. They support global economic stability and boost development. These goals are for the benefits of Saudi Arabia whose economic interests are linked with direct, strong and balanced global economic growth which contributes to the stability of world demand for oil. The fund's approval or refusal to lend any country is only after a detailed study of the country's economic situation; loan applications are referred to the Council of Executive Directors which consists of 24 members including Saudi Arabia and are approved/denied to a majority vote. The lending program between the IMF and the beneficiary country includes a set of goals ought to be complied with for any of the loan installments to be paid. In addition, there are arrangements guaranteeing loan payment to the IMF including periodic review of the borrowing country's economic performance by the Council of Executive Directors. This is to achieve economic stability and to safeguard IMF's resources. On supporting the euro zone, Al-Assaf said it is not the first time IMF contributes in mega financing operation to counter global crises. The fund had contributed earlier in financing programs during the Latin American countries' crisis in the eighties, aside from the Mexican, Asian and Argentinean crises. As to supporting the euro zone during the current crisis, the operation involves pledges from three major parties - the European Union (EU), European Central Bank and IMF - or what is known as the troika, so as to provide financial resources to be used as loans in case the financial crisis in Europe aggravates. This is not a free-of-charge support and Saudi Arabia is not a party to this operation. Its commitment is indirect and comes as a result of its membership in the IMF as is the case with the 186 other countries members of the fund. Some countries in the euro zone benefit from IMF loans due to their membership in it, which results in similar commitments and rights. Providing these services, the IMF, European Central Bank and European Union do not mean they would necessarily be used instantaneously, but they are undertakings commitments and pledges by the aforementioned three authorities to contribute in mitigating the risks and restore market confidence. Also, these arrangements enable borrowing countries to have access to capital markets. In conclusion, Al-Assaf underlines that Saudi Arabia plays an important role in the IMF and contributes in it in view of its economic weight, and it also gets good returns thereby boosting its foreign reserves. The IMF loans do not pose any risks to the contributing members due to the excellent nature of the debts and the fund's history of complying with its financial commitments. __
