RIYADH: The Council of Ministers on Tuesday approved a new law which includes changing the name of the Ƶn Monetary Authority (SAMA) to the Saudi Central Bank.
Under the legislation, the new Saudi Central Bank will be linked directly to the monarch and will enjoy full financial and managerial independence.
The Saudi Central Bank Law set out three core objectives for the new institution namely, to maintain cash stability, boost confidence and trust in the financial sector, and support economic growth.
The new legislation states that the central bank is responsible for setting and managing monetary policy and it outlines the relationship between the bank, the government, and other international important organizations and bodies. It also sets a framework to govern the bank’s operations and decisions.
Fadhel Al-Buainain, an economic expert and member of the Shoura Council, said one of the important aspects of the Saudi Central Bank Law was that it was linked directly to the king.
“This enhances its full independence with respect to setting the monetary policy and the bank’s relationship with the government and global organizations,” he added.
The law states that the abbreviation SAMA, which was established in 1952, would remain unchanged due to its historical importance domestically and internationally.
“The fact that the bank will keep the SAMA abbreviation unchanged is important and reflects a wise decision because the abbreviation is widely-known,” Al-Buainain said.
While the SAMA acronym will remain, Hassan Alwatban, an economic consultant, outlined the differences between the monetary authority and the central bank.
For the central bank to perform its duties properly, he said it needed to be fully independent when it came to decision-making, especially decisions related to managing state funds.
Another difference was that the president of the central bank would not be under the state’s authority and their nomination would be made by a legislative authority. The government or state could not appoint or remove the president except by the most supreme judiciary authority.
Thirdly, he added, a government agency could not interfere in the bank’s affairs because the bank enjoyed full monetary power.
Alwatban told Arab News: “Therefore, changing the monetary authority to a central bank is healthy for the national economy.
“The tasks of the Ministry of Finance, which is responsible for financial policies, will be set apart from the tasks of the central bank, which is responsible for setting the monetary policies. Before the change, the tasks of the Ministry of Finance and SAMA overlapped.
“Besides, the Ministry of Finance was in charge of the financial policy and the monetary policy at the same time, a fact that made SAMA focus on serving the banks’ interests more than focusing on serving the interests of citizens,” he added.
