fahad almubarak : brief review of financial developments in saudi arabia speech by his excellency dr fahad almubarak, governor of the saudi arabian monetary agency ( sama ), marking the seventh anniversary of blessed allegiance pledge to the custodian of the two holy mosques king abdullah bin abdulaziz, riyadh, 17 may 2012. * * * saudis celebrate on the 26th of jumada ii 1433h ( may 17, 2012 ) the seventh anniversary of the blessed allegiance pledge to the custodian of the two holy mosques king abdullah bin abdulaziz. the celebration is a true image of loyalty to the custodian of the two holy mosques, who is faithful to his nation ’ s interests. it is based on well - established bases, in the forefront of which are the tributes of our wise leadership such as the great keenness on the welfare of citizens and the enhancement of the development process. it is difficult to enumerate the achievements of the custodian of the two holy mosques in a few words, but, however, i will touch upon some of them. the custodian of the two holy mosques has taken a broad range of decisions and measures aiming at restructuring and regulating the economy, updating regulations and legislation to enhance the efficiency and competitiveness of the economy and support the optimal operation of production factors, apart from providing an advanced regulatory and administrative framework and an attractive environment for domestic and foreign investments to achieve diversity in the economic and productive environment in order to continue creating job opportunities for the sons and daughters of the kingdom. fortunately, oil prices have constantly improved, helping to accomplish many of the development objectives. as a result, the private sector during the period from 2005 up to the end of 2011 achieved a real annual growth rate averaging 5. 5 percent. the balance of payments ( bop ) recorded a surplus of rls 2. 5 trillion. the actual expenditure of the public finance stood at rls 3. 8 trillion, of which rls 1. 0 trillion were for capital expenditures. moreover, the ratio of public debt to gdp declined from 39. 2 percent in 2005 to 6. 3 percent in 2011. the banking sector recorded strong and constant growth during that period, surpassing significantly the repercussions of the global financial crisis, and total assets of banks rose by more than two fold. many development projects have been approved for enhancing and modernizing the infrastructure, including roads, airports, telecommunications, water & electricity

+ reflects the inherent strength of the domestic banking system. the developments of the banking sector have been reflected positively on the performance of the saudi economy. over the preceding three years, gdp ( at current prices ) have increased by an annual average growth rate of 18. 1 %, and private sector gdp by 6. 7 %. money supply has grown by an annual average rate of 12. 9 %, providing adequate liquidity to growth requirements of the economy. looking ahead, the financial system and the banking sector will benefit from the state ’ s efforts to diversify the economy and improve the investment environment through regulatory and structural measures taken in the various sectors. a number of new laws and regulatory guidelines have been enacted to enhance economic growth and achieve further opening of domestic markets. the laws included the foreign investment law, the capital market and cooperative insurance laws and a new labour law. another important development is the kingdom's accession to wto. turning to the capital market, its contribution to the growth of the saudi economy has been clearly evident. over the preceding few years, the market has witnessed remarkable development, and its role as a financial intermediary between savors and investors has been boosted. it would be appropriate to indicate that the recent market correction witnessed by the market has had no adverse consequences on the banks and banking system. this is because sama, through its supervisory functions, has undertaken measures necessary for safeguarding banks and customers against any unfavorable developments in the market. the measures included tightening prudential limits related to lending for trading in the market, issuing controls for consumer loans and other measures which would protect customers and banks against expansion in consumer loans which may end with trading in the equity market. consequently, saudi banks have managed to do well in the first quarter of 2006. as the shares market stabilizes and continued good performance by banks is maintained, it is expected that the financial system will greatly benefit from the efforts of the authorities to deepen and broaden the capital market. now let me briefly touch upon the opportunities for the saudi banks over the medium term. 1. the saudi economy is undergoing unprecedented boom era based on a well - developed and diversified base covering all sectors of the economy, including oil and gas, heavy, medium and light industries ; banking, investment and insurance services ; and transport and tourism, within a population demographic structure which indicates an expected growth in the segment that would need banking services. these entire factors make the banking and financial services market poised to grow