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Volume 20, Number 1January/February 1969

In This Issue

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The Riyal

A Miracle In Money

Written by Thomas W. Shea
Photographed by Burnett H. Moody
Additional photographs by Ahmad Montakh

In 1957 the economy of Saudi Arabia was skidding dangerously. Inflation was out of control. The value of the Saudi riyal had slipped to half what it had been. Oil revenues were down some $50 million and the government was nearly half a billion dollars in debt.

Six years later the situation had changed beyond belief. The national debt had been paid. New highways were reaching out in all directions. Schools and hospitals were going up. The riyal was, literally, as good as gold and a rickety economy that had endured with little change for 2,000 years had been transformed into a modern financial structure as sound as any in the world.

A miracle? In a sense, yes. But a miracle wrought by three men: a forward looking prince from the House of Sa'ud, who not long after would become His Majesty King Faisal ibn 'Abd al-'Aziz Al Sa'ud, and two knowledgeable and determined financial experts.

As recently as the early 1940's Saudi Arabia had an economy that, to say the least, was undeveloped. Most people were subsistence farmers, herdsmen or petty traders, and business activity depended largely on thin columns of camels trudging inland with cloth, grain, and a few luxury articles, or carrying dates, Arabia's only important export, from the widely scattered oases out to the ports for shipment abroad. Although paper currency from abroad was used along the coast, the main medium of exchange in the interior was the Maria Theresa dollar, a large silver coin minted in Europe but still bearing the profile of the Holy Roman Empress, the flamboyant Imperial Seal of Austria, and the date, 1780. Until oil was discovered, income was derived mostly from customs duties on imports and the income from tens of thousands of pilgrims who poured into Jiddah every year en route to Mecca. The only fluctuation in the economy occurred when the pilgrims arrived. And without them—and their small hordes of gold and silver coins, Indian rupees, British pounds and Dutch guilders—the country would have been hard pressed to find extra money for imports.

In those days the government's role in the economy was based on the Islamic dictum that "things Exchanged shall be of equal value." "Money" meant coins made of metals having intrinsic values equal (as far as possible) to the exchange values of the coins and when the government paid its bills it did so whenever possible in silver—for soldiers, businessmen and low-ranking employes—or gold—for larger transactions. Coupled with the Islamic opposition to payment of interest, this approach to finance limited the functions of banking to settling importers' foreign accounts, exchanging the various foreign coins which freely circulated in the country and storing money. Money changers abounded in the pilgrimage centers, but until 1948 there was only one bank in the country, the Netherlands Trading Society, which had been established in Jiddah in 1926..

In 1925, however, the year after King Abd al-'Aziz consolidated the country by conquering the Hijaz, the government did attempt to establish a national currency by issuing its first coin. It was the copper-and-nickel qirsh. Two years later the silver riyal, valued at 22 qirsh, was also issued. The exchange rate of the riyal was established at 10 riyals for each British gold sovereign, the gold coin circulating most widely in the Kingdom at that time.

At this value, unfortunately, the Saudi riyal was a "full-bodied" coin. That is, the market value of the silver it contained was approximately equal to the official rate at which the government would accept it in exchange for gold. Money changers and merchants were quick to notice this. When the world price of silver rose so high that the value of metal contained in the riyals exceeded the official exchange value of the riyal, they were equally quick to exchange gold and other currencies for silver riyals, then melt the riyals and sell them as bullion to silver brokers. At such times, silver riyals disappeared from circulation.

In 1939 the company that would become the Arabian American Oil Company (Aramco) made its first oil payments to the Saudi Arabian Government. They were the first of the revenues that would later change the Saudi economy so drastically, but at the time they were of minor importance—certainly insufficient to offset the economic decline that set in as World War II got under way. Income from pilgrimage virtually ceased and interruptions in shipping caused critical shortages in food and clothing. The U. S. government helped—'by extending lend-lease aid in the form of 9.3 million ounces of silver, minted into 25 million Saudi riyal coins—but by early 1944, the economy of Saudi Arabia was still in a state of suspended animation. It was a period of breathless calm before the onset of the tumultuous changes which, within two decades, would reshape the whole economy of the country.

The changes actually began in 1945 with the expansion of oil production, the injection of large amounts of cash into the economy, and the expansion of the government's payments and purchases. Capital investments in the oil industry stimulated a demand for local wage labor in the Eastern Province and created markets for large quantities of imported equipment and construction materials. This activity in turn generated the need for port facilities, airports, storehouses, roads, and other supporting physical facilities. The demand for money—for cash, that is—soared. The Saudi Government believed that the only proper way to meet the increased demand for money was to put more gold and silver coins into circulation. Accordingly, for a two-year period beginning in 1948, Aramco paid its oil revenues in foreign gold coins which were packed in kegs and flown to Jiddah every month. The Saudi Government also placed with the U.S. Mint a succession of orders for millions of full-weight, Arabic-inscribed Saudi silver riyals.

The riyals were assigned an official exchange value equivalent to the cost of the silver they contained, plus mint charges and transportation costs. In 1944, when the government bought most of the coins, their delivered price was about 30 cents each. Even after the war, however, as world silver prices declined, and the value of the riyal in the Jiddah exchange market dropped as low as 21 cents, the government continued to charge buyers of riyals (mainly foreign firms which needed them to meet payrolls) 30 cents each, on the grounds that "things exchanged shall be of equal value."

Insistence on hard money .had unexpected side effects too, particularly for companies like Aramco which, in the 19S0's, had a payroll running to five million riyals a month. With only one denomination of silver coin available a month's wages for a typical worker would weigh about 10 pounds. To meet the entire payroll the company had to transport, store, guard and count out 60 tons of silver every month. It also had to find extra storage space, provide a fleet of trucks and hire dozens of laborers to load and unload the sacks of coins plus a large staff of sorters and counters.

Inevitably, the country's uncomplicated financial structure began to break down. Sufficient for the simple economy of the previous age, it could not possibly stand up to the pressures of modern economic activity. In the absence of effective machinery to control the increasingly complex pattern of government receipts and disbursements, government expenditures began to exceed income by ever-growing amounts. The Kingdom's first detailed government budget—published in April, 1948—proved unworkable because the value of the Saudi riyal in which the budget was expressed was constantly changing in terms of the numerous foreign currencies which circulated widely in the country, and the values of these currencies were constantly changing in relation to one another. In addition, oil income was paid in gold or foreign exchange, but about half of the government's expenditures—for its payroll—were met with silver riyals, and riyals were frequently in short supply. The rates at which riyals and qirsh were exchanged for one another varied from time to time and from place to place. Even the country's geography conspired to force change: because of the vast distances and poor communications between the oil producing area, the country's administrative capital and the financial center, the development of orderly financial transactions was almost impossible. Nor did the general absence of banks help. Although by 1948 a number of foreign banks had begun to open branches in the main centers of commercial activity—Jiddah and the Eastern Province—there were to be no banking facilities elsewhere in the country for another five years.

By 1951 the government realized that it needed to set up a more orderly monetary system. It also realized that this meant creating an administrative apparatus able to channel into the economy enough money to fuel business activity yet avoid inflation. It would also have to insure that the rapidly increasing oil revenues be used in accordance with the government's wishes. Accordingly, in the summer of 1951, the government brought in a team of foreign financial experts, backed by the U.S. Point Four Program, to draw up a program of monetary reform. The main features of this program were implemented in October, 1952, when the Saudi Arabian Government announced the formation of a modified central bank, It was called the Saudi Arabian Monetary Agency (SAMA).

SAMA's primary responsibilities were large: to stabilize and maintain the external and internal value of the Saudi riyal, hold the nation's monetary reserves, buy and sell gold and silver for the government account, advise the government on the issuance of new coinage and regulate the activity of commercial banks and money lenders. The agency was expressly forbidden to lend money to the government or private individuals,, to issue paper currency, or to pay or receive interest. A governing body presided over by the Minister of Finance was appointed, with an American financial expert as its first governor, but effective control was kept in the hands of the minister. It wasn't until 1958, after a nearly disastrous financial crisis, that SAMA was accorded genuine independence.

In 1952, shortly before SAMA was formed, the government, still convinced that "hard" money was the only good money, had decided to meet the country's growing need for currency by issuing its own gold coin. The coin, called the Saudi sovereign, was practically identical in weight and fineness to the British sovereign and was made full legal tender, It could be freely exchanged by SAMA at the rate of 40 silver riyals (nearly eleven dollars) per sovereign, and gave Saudi Arabia a full, bi-metallic money standard.

Like other countries that had tried—and abandoned—it, Saudi Arabia's experience with a bi-metallic standard was not a happy one, and for the same reason: the world market prices of gold and silver do not remain in constant proportion to one another and even minor changes in the world market prices of the metals are sufficient to drive coins of one or the other metal out of circulation. In Saudi Arabia, the silver in the riyal eventually became more valuable as silver than as money and wound up in foreign bullion markets. The gold in the sovereigns, on the other hand, was more valuable in sovereign form than as gold, which encouraged counterfeiters.

Soon after the issue of the gold sovereign, counterfeiters began to reproduce large numbers of full-weight coins which only a few experts could distinguish from the genuine ones. The spread between the value of the gold sovereign (nearly $11) and the world market value of the gold in the sovereign (about $9) was not much, but it was sufficient to provide counterfeiters with an adequate incentive to meet the risks and costs of stamping, transporting, and circulating the coins.

The disappearance of silver began in 1955, when world silver prices rose by about 6 c an ounce, or about one per cent above the previous year's average. Paradoxically, one of the forces contributing to the rise in the price of silver was the unusually large volume of silver purchases which the Saudi Government had made during that year for the purpose of minting riyals. Whereas the Saudi Government was willing to redeem silver riyals in circulation for only 27¢ in foreign exchange, the world value of the riyal's silver content rose to more than 30¢. This narrow margin was sufficient to induce riyal holders to sell them for bullion. By the end of 1956 a large proportion of the silver riyals minted by the government had been shipped abroad to bullion markets, despite heavy fines imposed on exports of silver.

In the meantime SAMA had come into existence and, in what was to be an unusual chapter in world monetary history, had found a way to introduce paper currency.

Paper currency was not unknown in Saudi Arabia. Coastal merchants accepted Indian rupees, East African shillings and even paper scrip issued by Aramco for purchases in company facilities. But it was not in general use and SAMA authorities, believing that circulation of full-bodied coins was a waste of the country's reserves, thought it should be. But since the charter expressly prohibited the agency from issuing paper currency, officials had to find a way which would not conflict with the law. They finally hit upon the idea of issuing paper "pilgrim receipts" as a sort of traveler's check to meet the seasonal demand of foreign pilgrims for riyals. Since government circles desperately needed an effective way of resolving chronic inconveniences to merchants in the pilgrimage centers by. large seasonal fluctuations in the demand for silver riyals, the financial experts' proposal was not as unwelcome as it might have been. In previous years, a sharp increase in the public's demand for Saudi riyals would develop regularly during the month of the pilgrimage as hundreds of thousands of foreigners arrived at the holy places. This would force up the riyal's exchange value. Then, with the departure of the pilgrims, the demand would collapse. Since merchants and money changers objected to holding large stocks of riyals in between pilgrimage seasons, it didn't take much of an increase in the value of silver to induce them to export the riyals as bullion. By the time the next pilgrimage Season arrived, the shortage would again be acute and replacing them would be both expensive and time consuming.

Against that background, agency officials persuaded the government that the demand for currency could be more cheaply and expeditiously met by issuing paper "pilgrim receipts," fully backed by silver riyals. They received government approval in 1953 and immediately issued a small number of notes in denominations of 10 riyals. In 1954 they issued even more, this time, in both five-and ten-riyal denominations.

The pilgrim receipts, freely exchangeable for silver riyals and entirely backed by silver held in government vaults, were an immediate success. Furthermore they quickly came into general use throughout the Kingdom, for they were well made and durable, difficult to counterfeit, and far more convenient to handle. They also filled an important gap in the national currency system, which hitherto had no denomination between the riyal and the 40-riyal sovereign—which was rather like an American trying to do all his shopping with only silver quarters and 10-dollar gold pieces. By the end of 1954, more than 150 million riyals' worth of pilgrim receipts were in circulation and were rapidly displacing both the gold sovereign and the silver riyal as the principal medium of exchange. In 1956, when the silver riyal was becoming scarce, one-riyal pilgrim receipts were also issued.

Unfortunately however, the government, in 1955, succumbed to the great temptation facing all governments which rely on paper currency: to attempt to provide financing via the printing press.

Before 1955 the strain imposed on Saudi Arabia's rudimentary financial institutions by the country's abrupt entry into modern commercial and industrial life had been great, but not catastrophic. And under King Abd al-'Aziz, government spending had, to a large extent, been kept in check by the monarch's strong predilection for austerity in personal living—a traditional feature of Bedouin life. After his death in November, 1953, however, restraints on consumption gradually disappeared, and foreign exchange payments by Saudi Arabia began to rise much faster than income. Before long the country was deeply in debt.

An ominous symptom of the impending financial crisis appeared in July, 1955. Under a new decree, two important restrictions on the expansion of the currency supply were removed. One had prohibited the monetary agency from issuing paper money. The other had prevented it from lending money to the government. Although the pilgrim receipts were actually paper money, their issuance in 1953 had been contingent on the understanding that they were needed for the pilgrim trade and that they would be entirely backed by hard money payable on demand. Their wide acceptance, and the fact that they were not, as a rule, presented for redemption in hard money, inevitably tempted the government to issue them in ever larger amounts. Worse, the country gradually abandoned the requirement that the receipts have 100 per cent hard money backing. Now the government could meet its riyal bills simply by taking a loan from SAMA or by ordering additional pilgrim's receipts to be printed. To add to the problem, local banks began to extend large loans to members of the government, mainly on the security of overvalued real estate holdings.

The mere increase in the supply and turnover of riyals, however, does not in itself adequately explain the severe inflation which hit Saudi Arabia between 1956 and 1958. An increase in the money supply and turnover is quite a normal phenomenon for a country which is undergoing the types of economic changes found in Saudi Arabia during the 1950's. In the first place, the swift increase in oil income in the form of foreign exchange and precious metals would have provided support for the currency. In the second place, much of the increase in total money expenditure within the country was a normal, healthy feature of economic development. Large numbers of people were shifting from self-subsistent agriculture and animal husbandry, which involved only incidental cash transactions, to a monetary economy which involved dependence on money wages for income and on money outlays for subsistence.

The real problem was that the increase in the supply and turnover of riyals was greater than that which could be supported by the monetary reserves set aside from increasing oil income and by the monetization of the economy. A great deal of spending was taking place without even being routed through the domestic monetary .system. Some individuals in the government, for example, maintained private accounts with overseas banks and many of the transactions in these accounts, (receipts and disbursements of foreign exchange) did not involve the repatriation of foreign exchange reserves to SAMA. Thus, the gold, silver, and foreign exchange actually routed through SAMA provided insufficient backing for the expanding amount of riyals issued for domestic use. As the printing presses turned and the supply of riyals chasing foreign goods increased relative to the foreign exchange earned and repatriated to Saudi Arabia, the value of the rival went down relative to both goods and foreign currencies.

A second problem was the normal reaction of all individuals who hold a currency which is weakening: they exchange it for other currencies, or for gold, jewelry or merchandise. Saudi Arabia was no different. The widespread effort to reduce holdings of riyals tended to increase the turnover of riyals and increase spending. That, in turn, reinforced the inflationary pressures.

In 1956 still another problem arose. The second Arab-Israeli war broke out and oil production fell off sharply. Revenues from oil, which had reached $341 million in 1955, fell to $290 million—a level at which they remained almost without change until 1959 and from which they did not appreciably recover until 1961. This, on top of unchecked government spending, excessive borrowing and the growing flight of capital, weakened the exchange value of the riyal even more. By early 1958 it had plunged from the official rate of 3.75 riyals to the dollar to an all time low of 6.25 riyals per dollar. Simultaneously, prices throughout the country soared. By the beginning of 1958, the country faced uncontrolled inflation, almost complete exhaustion of its foreign exchange reserves, and nearly half a billion dollars of government debt. Disaster was not far off.

It was at this point that Crown Prince Faisal ibn 'Abd al-'Aziz Al Sa'ud, then Viceroy and Prime Minister, went into action. Neither unaware of what had been happening, nor insensitive to its perils, he had already, in October, 1957, engaged two financial experts to design and implement a program of fiscal and monetary reform. The experts were Ahmed Zaki Saad, an executive director of the International Monetary Fund, and Anwar 'Ali, director of the Middle East department of the IMF.

It would have been hard to improve on the Crown Prince's selections.

Between 1934, when he won an MA in economics at Ismalia in Lahore, and 1958 when he became governor of the Saudi Arab Monetary Agency (SAMA), Anwar 'Ali had served in such challenging jobs as undersecretary in the Ministry of Finance in India, deputy undersecretary in the Ministry of Finance in Pakistan and director of the National Bank in Pakistan as well as the post with the International Monetary Fund.

Ahmed Zaki Saad, who was born in l. Egypt, attended the universities of Cairo and Paris and spent nine years on foreign diplomatic assignments, carried similar credentials. He spent six years as undersecretary of state in the Ministry of Finance and had served as governor of the National Bank of Egypt, executive director and governor of the International Monetary Fund and governor of the International Bank for Reconstruction and Development.

Despite their obvious qualifications, however, neither Anwar 'Ali nor Zaki Saad could have achieved anything substantial if the leadership of Saudi Arabia had not been in the hands of a man who could provide the second prerequisite of effective economic reform: the ability to put into effect the remedies the experts prescribe. .

In the Crown Prince, fortunately, Saudi Arabia had such a man. Able and popular, the second son of the country's founder was then serving as Prime Minister and Foreign Minister. No economist, he saw, nevertheless, that only when government spending did not exceed income could there be fiscal stability. He decided to throw the full weight of his prestige and all his considerable ability as a leader and administrator into the effort to clamp controls on excessive spending. Since Faisal was already a popular leader whose frugal personal life reflected that of his eminent father, and since he had wide experience in the various ministries, his influence was crucial. Without it, according to both 'Ali and Saad, their technical contributions would have been useless and the fiscal overhaul they had proposed would have been out of the question.

The objectives of the reform program were clear: to balance spending and income, pay off the national debt, curb inflation, and—above all—stabilize the riyal without disrupting business. In view of the existing circumstances they were also extraordinarily ambitious. As the Crown Prince and his aides knew too well, getting drastic fiscal and monetary reforms accepted and successfully implemented during a severe crisis by a government lacking experience in monetary and fiscal management would require an unusual amount of tact, persuasion and imagination.

Success meant taking decisive measures, yet introducing them cautiously, and without imposing unenforceable controls. Curbs on imports, for example, had to be imposed, but at the same time, a continued supply of consumer staples at reasonable prices had to be assured. Similarly, non-essential commodities had to be limited, but without encouraging large-scale smuggling that the government at that time would have been unable to prevent. Import licenses and quotas could be used but sparingly, because the civil servants needed to administer them were in short supply. Price controls were out for the same reason, and also because they would probably affect the country's business climate adversely.

There were ways, however, and Saudi Arabia employed them all. One simple but effective step was to establish a dual rate of exchange for the riyal. SAMA sold foreign exchange at the fixed official rate of 3.75 riyals per dollar for budgeted foreign exchange and simultaneously introduced a licensing system permitting a list of essential goods to be imported in limited quantities at the official rate. Foreign exchange for all other imports, except automobiles, could be bought without restriction from SAMA at the flexible free market rate, which by mid-1958 was about 5.50 riyals per dollar. Imports of automobiles were banned because they accounted for a large proportion of total imports—and because enforcing the ban was easy.

The effect was to help curb the foreign exchange drain sharply. Meanwhile, riyal profits realized by SAMA from the sale of foreign exchange at free market rates were earmarked for debt settlement, and budgeted expenditures were cut to a level below forecasted income receipts in order to realize additional funds for debt repayment.

The object of establishing a dual foreign exchange rate for the riyal was to bring the free market rate and the official rate for the riyal together gradually with minimal losses for businessmen who had made investments at the time when the value of the riyal had fallen to a low level. SAMA realized its objectives by assigning an important fraction of its monthly revenues to an exchange stabilization fund, which it used to supply importers' requests for foreign exchange. Because the government cooperated by holding its expenditures in check, the size of this foreign exchange fund increased, and SAMA was able gradually to lower the price at which it sold foreign exchange to importers. By mid-1959, the ban on automobile imports was removed; by December, the riyal had appreciated to about SR 4.50 per dollar, a point about half-way between the official rate and the free market rate at the time the financial reforms were introduced.

On December 31, 1959, the government announced devaluation of the riyal from 3.75 per dollar to 4.50 per dollar, the then prevailing free market rate. But to head off a sharp rise in the prices of food staples and drugs, hitherto licensed for import at the official exchange rate, the government also authorized subsidy payments to importers of these goods in order to offset the foreign exchange loss caused by devaluation. Although other licensed commodities, including clothing and capital goods, were not included in the subsidy program, the general decline in economic activity caused by the government cutback in spending prevented their prices from increasing.

The devaluation of the riyal was followed by a formal abandonment of the old bi-metallic system. The Saudi gold sovereign was withdrawn from circulation, and provision was made to replace the old pilgrim receipts with a full-fledged paper currency. The paper money was issued in 1961 against a 100 per cent reserve of gold and convertible foreign exchange (mainly American dollars) held on behalf of SAMA. As for the silver rivals, most of them had long since disappeared into foreign bullion markets.

Within 18 months of the inception of the program—by January, 1960—it was clear that it was a success. The country's inflationary spiral had been reversed, the international exchange value of the riyal had been stabilized, a modern, efficient monetary system had been created and the government had begun to accumulate and earmark a substantial amount for debt retirement—all at a cost of a moderate decline in business and some unemployment.

The second phase, debt repayment, began in 1959 and was completed within five years. In that time, the government repaid $190 million of foreign debts, more than $150 million of debts to the Monetary Agency, and more than $40 million of debts to domestic business firms. By 1963 Saudi Arabia was completely out of debt and ever since has been one of the few countries in the world with no national debt.

By 1960 the government was sufficiently in control of its financial affairs to turn its attention to economic development. Following the report of a World Bank mission sent to Saudi Arabia that year to make recommendations concerning economic development priorities, the government embarked on a program to equip the country with the economic and social infra-structure of a modern state. This development program included the construction of a network of paved highways linking- all major population centers in the Kingdom, enlarging and modernizing port and airport facilities, providing universal free education throughout the country, introducing a nationwide public health program, and furnishing Saudi municipalities with roads, sewers, water supply systems and sanitary food markets.

The government's program of economic recovery and development was aided by the resumption of a strong upward trend in oil income beginning in 1959. In that year, oil revenues were approximately $300 million; by 1962 they had risen above $400 million a year; in 1967, they were more than $800 million per year.

The Saudi Government has so far been able to finance its development program entirely from current revenues, while maintaining a large gold and foreign exchange reserve. By the end of 1967, there were nearly 1.5 billion riyals—almost $333 million—in circulation, of which almost a fourth was backed by gold and the remainder by convertible foreign exchange, mainly dollars. In addition to these assets, the Monetary Agency's banking department, which acts as the fiscal agent for the Saudi Government, holds assets in the form of gold, silver, and foreign exchange which have, during the last two years, ranged in size from $350 million to $625 million. This is equivalent to between 6 and 12 months of imports at current import levels.

Now the Saudi riyal is linked with other world currencies by an agreement with the IMF which fixes the par value of the riyal at 22.2 U.S. cents per riyal, or 4.50 riyals to the dollar, a rate which has remained unchanged since 1960. Riyals are issued in the form of monetary agency notes valued at 1, 5, 10, 50 and 100 riyals. Each riyal is divided into 20 qirsh, which circulate in the form of cupro-nickel coins of 1, 2 and 4 qirsh. Each qirsh is further divided into 5 units called "halalahs", a unit introduced for accounting purposes only, which permits the division of riyals into decimal fractions. (One little-known fact about the riyal is that a thread of pure silver is imbedded in each note—a symbol, perhaps, of the strength of the currency.)

The currency supply has been rising at a rate of more than 10 per cent per year since the monetary reforms of 1959. This increase has been needed primarily to meet the expanding volume of business activity, and has been accompanied by continued stability in the general price level. The expansion of banking facilities since the reforms has also been impressive. There are today three Saudi and seven foreign banks operating in Saudi Arabia, with branches in 19 cities and total deposits of more than $200 million. In addition, the government has recently established an agricultural bank and is planning to establish an industrial bank.

The country is also attempting to diversify its economy in order to reduce its dependence on oil. The autonomous government agency, Petromin, has entered into agreements with foreign firms for the production of fertilizers and sulphur for export from the country's extensive natural gas resources. An extensive program of mineral exploration is under way. Teams of foreign experts are engaged in a detailed nationwide survey of the country's underground water resources as part of a comprehensive program for developing agriculture, thus reducing the country's dependence on imported foodstuffs. Numerous systematic feasibility studies of industrial development possibilities are in process.

The government's monetary reforms, introduced at a moment of the nation's history when its economic problems seemed almost insurmountable, have enabled Saudi Arabia to mobilize its great income from oil for the purpose of systematic nation-building. As a result, Saudi Arabia is one of the world's very few less-developed countries to be in a position to accomplish the difficult task of creating a stable, expanding economy without the need for outside financial help, and without even incurring the burden of a national debt.

Dr. Thomas W. Shea studied at Duke University, the American University of Beirut and the Benares Hindu University in India, and earned a Ph.D. in economics at the University of Pennsylvania where he held a Ford Foundation Area Studies Fellowship. He joined Aramco in 1959 and is now a staff economist.

This article appeared on pages 26-33 of the January/February 1969 print edition of Saudi Aramco World.


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