EconSource: Saudi Arabia Remains Committed to Dollar Peg

Pressure on the Saudi Arabian riyal in the currency forwards market eased on Tuesday after Ahmed al-Kholifi, Deputy Governor for Research and International Affairs at the Saudi Arabian Monetary Agency (SAMA), said the kingdom was committed to keeping the riyal pegged to the US dollar. Kholifi denied market speculation that plunging oil prices will push the kingdom to reconsider the currency link, saying the riyal’s peg of 3.75 to the dollar “is a policy that has served us well in the past.” Saudi central bank officials rarely speak in public, Kholifi’s remarks may have been designed to ease market worries about the peg, which had increased in the last few days as sliding oil prices hurt Saudi export revenues. He added that the kingdom’s economy is expected to grow 3 percent this year. [WSJ, Reuters, Bloomberg, 8/25/2015]

Currency crisis in Iraq could risk fight against ISIS
The threat of a currency crisis in Iraq could have effects beyond the country’s economy and markets. A foreign-exchange crunch resulting from a global drop in oil prices could force a devaluation of the dinar and risk the ability to fight the Islamic State (ISIS or ISIL). Iraq is dependent on oil revenue to fund its operations against ISIS and quell growing unrest over the economy. In August, the central bank sold $4.6 billion of currency to keep the dinar at a pegged rate, marking a daily outflow of about $184 million. Devaluation of the dinar would raise the cost of living for Iraqis already protesting against government corruption, power cuts, and water shortages. “The policy now is to meet the demand for dollars,” said Waleed Eedi, a Director General at the Central Bank of Iraq. The reserves will not be depleted because of oil sales and the dinar will not devalue, he said. However one expert said that if the battle against ISIS and low oil prices continues, “Iraq will then hit a wall.” [Bloomberg, 8/26/2015]

Syrian antiquities and the Islamic State’s billion-dollar economy
The Islamic State (ISIS or ISIL), is awash in cash, terrorist financing experts say. Extortion and taxation of the populations the group controls, illicit oil sales, ransoms, seizures of bank deposits, and now the sale of small antiquities are all contributing to ISIS’s coffers. According to the Congressional Research Service, the trafficking of antiquities may have become ISIS’s second most important source of revenue. Syrian antiquities are showing up on the London antiques market with growing frequency, with individual items fetching up to $1 million, according to reports. However, one bright spot that officials see in working to counter ISIS financing is that much of the group’s revenue sources within the territories it controls are not renewable. [CSM, 8/25/2015]

Hundreds of investors, policymakers expected to participate in Egypt’s Euromoney conference
The two-day Euromoney Egypt Conference is scheduled to begin in Cairo on September 7. The conference will focus on Egypt’s future finances and subsidy programs, according to Euromoney Conference Middle East Director Victoria Behn. “This year’s event will discuss possible alternatives to raise the needed finance to bolster Egypt’s economy in the coming period,” she said. Expected attendees include 600 major investors and and 1,000 policy makers from around the world. “Euromoney Egypt’s conference is particularly timely as Egypt’s investment promise is being turned into reality. We’re looking forward to seeing how the projects launched at [the Economic Development Conference] are being realized,” Behn added. Egypt’s Finance Minister Hany Kadry Dimian and Investment Minister Ashraf Salman are both expected to attend the conference. [DNE, Cairo Post, 8/25/2015]

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