The Secretary-General of the Union of Arab Chambers, Dr. Khaled Hanafi, during his participation in the second working session of the Banking Conference in Riyadh 2023, "Arab economic prospects in light of international changes", which was held entitled: "The risks of slowing global growth and high financial risks". In the presence of His Excellency Mr. Ayman bin Muhammad Al-Sayari, Governor of the Saudi Central Bank, His Excellency Mr. Muhammad Al-Etrebi, President of the Union of Arab Banks, His Excellency Mr. Abdul Rahman bin Abdullah Al-Hamidy, Director General of the Chairman of the Board of Directors of the Arab Monetary Fund. In addition to the heads of banks, organizations, and international companies, considered that “there is importance in enhancing confidence as a basic gateway to attract investments, whether by national and Arab investors or investors from foreign countries.”
Hanafi pointed to the importance of the issue of financial inclusion, which is very necessary in order to strengthen the capabilities of Arab banks and thus increase the size of the capital of Arab banks. Which currently ranges between 3 and 4 trillion dollars, which at the same time contributes to enhancing the reality of the formal sectors and reducing the impact of the reality of the informal or informal economy on the reality of Arab economies.
The Secretary-General called for the need to find legislation and laws to regulate the reality of digital currencies, not encrypted, which will have a great positive impact on enhancing the reality of trade exchange and cooperation with the rest of the world away from linking this cooperation to a specific currency that would limit the strengthening of our strategic relations with the countries of the world. He considered that liberalizing the currency exchange rate is an essential element for enhancing confidence, while it is important to take into account the concerns resulting from the issue of liberalization, for the success of our Arab economies, we must adopt a policy of liberalization, otherwise, we will continue to revolve in the same vortex and maze, and our Arab economies will continue to be governed by speculators.
He believed that “The current financial and economic crisis is having a global impact, and it is clear that it is affecting certain regions more severely than others. The region that may be among the most affected is the Arab region, where various international reports agree on alarming figures. According to the figures, the number of poor people will reach nearly 130 million people, representing a third of the population of the Arab region, and with the exception of some oil countries, these levels are expected to continue to rise to reach 36 percent by 2024. About 40-50 percent of people live on less than $2 a day. The region's unemployment rate is around 12 percent, among the highest in the world. A major concern is that youth unemployment (aged 15-24) exceeds 40 percent.”
He explained, “The global financial system is facing enormous pressure with rising interest rates that have shaken confidence in a number of institutions. The fall of Silicon Valley Bank and Signature Bank in the United States, and the acquisition of Credit Suisse in Switzerland by rival Swiss Union Bank with the support of the government, have contributed to the destabilization of market confidence and resulted in significant and urgent responses from the authorities. The latest issue of the Global Financial Stability Report shows the extent to which risks to banking and non-banking financial intermediaries are escalating amid rapid increases in interest rates to contain inflation. Historical experience shows that sharp interest rate increases by central banks often create revealing pressures on financial system imbalances.”
He noted that policymakers must take decisive measures to protect confidence in light of the escalating risks threatening financial stability. For this reason, the gaps in control, supervision, and regulation mechanisms must be addressed simultaneously, and settlement systems and deposit insurance programs in many countries must be strengthened. In critical crisis management situations, central banks may have to increase financing support to both banking and non-banking institutions. These tools would help central banks maintain financial stability, and allow monetary policy to focus on achieving price stability.
He believed that the Arab countries continued to maintain banking and financial stability, thanks to economic and banking policies that helped reduce the severity of the effects of the repercussions of current global developments, especially tensions on the European continent and inflationary pressures. According to international reports, it is important for Arab central banks to continue assessing systemic risks and studying potential direct and indirect links between current global developments and financial stability.
He considered that in the near term, urgent global efforts are needed to mitigate the risks of global recession and debt distress in emerging market countries and developing countries. Given limited policy space, it is crucial that national policymakers ensure that any financial support is focused on vulnerable groups. National policies aimed at promoting investment growth must be designed to suit the circumstances of the countries concerned, and it is necessary to always begin by establishing sound frameworks for public financial and monetary policies and carrying out comprehensive reforms in the investment climate. Policies aimed at promoting investment growth need to include comprehensive fiscal and structural reforms, including redirecting spending on ineffective subsidies.
He said: “The economic situation in most Arab countries has become in need of serious review, and therefore in order to achieve the goals of sustainable development and benefit from the issue of innovation. It is necessary to rely on new technologies in economic development, and they are directed to countries that have relatively advanced infrastructure and a system ready for research development, and innovation. In this area, the Gulf Cooperation Council countries, Egypt, Jordan, Morocco, and Tunisia must develop policies that take into account technological developments, build human capabilities specialized in modern technologies, and allocate the necessary financial resources to encourage national institutions to invest in these technologies and contribute to the advancement of science. While middle-income Arab countries, which have long-term national visions and a good science, technology, and innovation system, should develop incentive financing measures to enhance national innovation and support entrepreneurship, which are directed to middle-income countries.”
He stressed the importance of providing financing to support the establishment of startup companies, supporting research and development in small and medium-sized companies, regulating financial markets that help disseminate new technologies, enhancing risk capital, and establishing investment funds in order to enhance innovation. Spending should also be reduced, and public financial control should focus on containing the growth of current expenditures, especially public sector wages, setting priorities for capital expenditures, and enhancing non-oil revenues. It is also necessary to adopt a financial policy that works to increase the diversification of the state's financial revenue sources and direct financial policy to increase investment spending. It is also necessary to develop a financial and economic policy that takes the risks of oil price fluctuations into account when preparing budgets while developing special hedging policies that will address budget imbalances (deficits and surpluses).
Source (Union of Arab Chambers)
