Saudi Arabia: Peg and oil policy to hold in reform drive – HSBC

Research Team at HSBC, notes that more than 50 royal decrees were issued in Saudi Arabia on May 7th encompassing a major reorganisation of Kingdom’s government.

Key Quotes

“Responsibilities were redistributed amongst ministries and several key government officials were replaced. Saudi’s oil Minister for over 20 years Ali Al-Naimi was replaced by Aramco veteran Khalid Al-Falih in the renamed Ministry of Energy, Industry and Mineral Resources, which took the electricity sector under its wing. The Saudi Arabia Monetary Agency’s (SAMA) Governor Fahad Al Mubarak was replaced by Ahmed Alkholifey, who had been a deputy governor since 2013.

As explicitly stated by the Royal Court, the changes in leadership were meant to give shape and impetus to the implementation of the Saudi Vision 2030, the ambitious national development plan that was announced the previous month.

We do not expect the changes at the oil ministry or SAMA to herald any shift in the Kingdom’s long standing FX regime or its stance on oil supply. As was evident in the recent Doha meetings, Saudi Arabia’s stance on only accepting a collective oil production freeze went beyond Al-Naimi. The new SAMA governor also comes from within the establishment, and seems unlikely to make changes to the 30-year old currency regime. Significantly, the Vision 2030 reform agenda and statements by its champion Deputy Crown Prince Mohamed bin Salman have not included any discussion of monetary reform and we continue to expect the peg to remain in place.”