Goldman Sachs says Saudi currency peg ‘here to stay’

Tough call: Pedestrians pass the entrance to the new headquarters of Goldman Sachs in New York. It says the need for fiscal consolidation will make it more difficult to achieve Saudi Arabia’s goals of diversifying the economy and boosting employment. — Bloomberg

RIYADH: Saudi Arabia is sacrificing non-oil economic growth with fiscal policies designed to ensure its currency peg’s stability during a period of low crude prices, according to Goldman Sachs Group Inc.

“Maintaining the riyal peg at current levels remains a key policy priority for the Saudi authorities, ” Farouk Soussa, a London-based analyst at Goldman, said in a report to clients. “In a low oil price environment, however, this means that fiscal policy will have to tighten, keeping the budget deficit in check in order to ensure that external balances remain consistent with peg stability.”