Saudi Central Bank

The central bank of Saudi Arabia, still widely referred to by the abbreviation of its former name. Its exchange rate arrangement is a hard peg to the US dollar, held at a fixed parity for decades, and the arrangement carries the same consequence any peg does: a fixed rate combined with free movement of capital leaves no room for an independent policy rate, so the anchor's decisions are followed.

It is not identical to its neighbours' arrangements, and the differences are real rather than cosmetic. Parities, bands, anchor currencies and histories differ across the Gulf, and one state in the group runs an arrangement that permits small movements against the dollar where the riyal and the dirham do not. Gulf currency arrangements are therefore several arrangements with a family resemblance rather than one system.

What the peg fixes and what it leaves open are separate questions. It fixes the exchange rate and imports the anchor's policy rate; it does not fix inflation, fiscal policy, or the credit conditions the domestic economy runs on, and it does not remove the state's exposure to the oil price. Its durability rests on reserves and on the receipts that replenish them, which is why the fiscal breakeven price is read as an input to a currency arrangement that otherwise looks static.