Inflation in Saudi Arabia Essay Example | Topics and Well Written Essays - 4750 words

Inflation in Saudi Arabia - Essay Example The economy of the country of Saudi Arabia is oil based with active government intervention in major economic activities. The country ranks on the top in exports of petroleum products and plays an active role in OPEC. The petroleum sector of the economy accounts for 45% of the total revenues. Currently the government is engaged in encouraging the growth of the private sector within the economy as they believe such strategies will reduce the dependence on oil. The growth the private sector will also create employment opportunities. It has permitted investments in the telecommunication and the power sectors. In an effort to diversify the economy, the country acceded to the WTO in 2005. Focus was given to form a regulated market and the Saudi Arabia Monetary Agency (SAMA) emerged in 1984 after the government passed an instruction. The Capital market authority took over the responsibilities of the agency after its formation in 2003. November 26 marked the day when the first corporate gov ernance code was implemented. The sections provide provisions like preliminary level, board of directors, lucidity and disclosure, shareholders authority and the provisions for the general assembly and the closing provisions. Some of the experts opine to measure corporate governance using the Gompers and Metric. ... Considering the resource endowment of the country it was a logical decision to increase the development of oil and gas resource through downstream investments in refineries. Three factors influenced the decision. The investments were mostly capital intensive which was just appropriate for the small population of the country with enormous reserves of oil. It would have been possible to generate value added income which would maximise the revenues of the country through the export of refined petroleum as well as crude oil. The natural gas which would have been wasted can also be utilised and processed. Inflation The budget impacts on the growth of the economy and allocation or redistribution of resources. The difference between budgetary spending and revenues is defined as the budget deficit. Budget deficit contribute in the level of national debt. A variety of problems can result because of budget deficit. Lower national savings rate, higher rates of interest and inflation are some of them. It is possible to treat inflation as the continuous or sustained rise in the level of prices. A situation marked by inflation is witnessed by continuous reduction in the value of money. The transformation of the general level of prices is a common situation of inflation. In a situation characterised by inflation, the period of the rise in prices continues for a year, week or month. Some of the factors that lead to inflation are rise in the costs of imported materials, the costs of labour to rise and the high rate of indirect tax from the part of the government. In cases where the rise in the general price level is caused by increase in the level of wages as well as raw materials are regarded as cost push inflation. With rises in the costs of production the firms tend to