Ministers urge fiscal discipline, smart investment to tackle debt challenges at Saudi forum

RIYADH: Emerging market economies are facing escalating challenges, including geopolitical tensions, sluggish global growth, financial volatility, and increasing public debt, according to the governor of the People’s Bank of China. 

Speaking at the two-day AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the International Monetary Fund, Pan Gongsheng emphasized the need for proactive policy measures and strengthened multilateral cooperation to enhance economic resilience. 

“In my view, emerging markets face four key challenges,” Gongsheng said. “The first challenge is geopolitical tension.” He highlighted how increasing geopolitical conflicts and protectionism disrupt international value chains and restrict the flow of capital, technology, and labor. 

“There has been a drop in global growth and productivity gains and the rising divergences in key industries across countries, mainly due to uneven development and resource misallocation,” he said. 

Gongsheng’s remarks align with the IMF’s recent report, which warns that friendshoring — the practice of countries trading primarily with geopolitical allies — could reduce global economic output by up to 1.8 percent. 

Emerging markets, particularly in Asia, may experience up to 6 percent declines due to this shift.

Despite these warnings, a Financial Times report said China has intensified its control over technology and resources, including restricting key battery technology exports, disrupting global value chains, and escalating geopolitical tensions.

Gongsheng identified the second challenge as the slower medium-term growth of the international economy. 

“We are now facing policy uncertainties in some economies. If protectionism escalates, rising trade fluctuations will drive up inflation expectations and undermine medium-term growth,” he added. 

Citing IMF forecasts, he said global economic growth is projected to hover at just 3 percent in the medium term, the lowest level since 2000. 

Financial market volatility and capital outflows represent the third major challenge. 

“The trajectory of the interest rate in major advanced economies remains highly uncertain,” Gongsheng said. 

“Markets have become particularly sensitive to unexpected economic data. If rates differ and rise significantly from market expectations, market repricing may increase asset price volatility in emerging markets.” 

This aligns with a recent Reuters report, which said emerging markets are facing significant challenges due to a strong US dollar and high treasury yields. 

These factors have led to weaker local currencies, increased costs for servicing dollar-denominated debt, reduced capital inflows, and dampened economic growth. 

Policymakers in these regions find it difficult to counteract these pressures effectively, which are further heightened by new US tariff and trade policies. 

The fourth issue Gongsheng discussed was the burden of high public debt and its implications for financial stability. 

“The IMF points out that global public debt risk has risen significantly due to political and other factors. Those risks not only exist in developing countries — the level of public debt in some advanced economies also merits close attention,” he said. 

He warned that growing investor concerns over fiscal sustainability could trigger government bond market volatility, with potential spillover effects on other asset classes, liquidity risks, and financial stability. 

According to a report by the Institute of International Finance, the global debt stock increased by over $12 trillion in the first three quarters of last year, reaching nearly $323 trillion. 

The IIF attributes the rise to declining borrowing costs and a heightened risk appetite among investors, underscoring concerns similar to those expressed by the governor. 

To address these challenges, Gongsheng outlined key policy responses for emerging markets. 

“First, we should continue improving monetary policy frameworks, enhancing the efficiency of monetary policy transmission, increasing policy transparency, and improving policy communication,” he said. 

He also advocated for increased exchange rate flexibility, stronger public debt management, improved macroprudential regulations, and the development of local currency markets to mitigate capital flow risks. 

Gongsheng stressed the importance of multilateralism and global financial governance reform. 

“The IMF has made great progress in surveillance and governance reform. At the same time, there is still more work to be done for us to advance global financial governance reform,” he said. 

He called on the IMF to enhance support for developing countries, promote trade and investment liberalization, and establish comprehensive policy tools to help emerging markets address capital flow risks and external shocks. 

“The current quota shares can no longer reflect the actual position of emerging markets in the global economy,” Gongsheng said, urging the IMF to establish a “concrete and binding timetable” for future quota realignments, with discussions on fiscal realignment plans set by June.

JEDDAH: Saudi Arabia’s Northern Borders region, home to an estimated SR4.6 trillion ($1.22 trillion) in mineral resources, is emerging as a key driver of economic growth and investment, according to the Ministry of Industry and Mineral Resources.

The region is a major hub for phosphate production, a critical component in global food security due to its use in agricultural fertilizers. Mining projects in Waad Al-Shamal, an industrial city dedicated to the sector, have positioned Saudi Arabia among the world’s leading phosphate producers and exporters.

As part of Vision 2030, the Kingdom is accelerating efforts to develop its mining sector and reduce its reliance on oil and gas. The ministry has identified mining as a key pillar of economic transformation, focusing on resource efficiency and attracting both local and international investment.

Jarrah bin Mohammed Al-Jarrah, spokesman for the ministry, said the region contains significant deposits of phosphate, coal, dolomite, limestone, and silica sand. It also has five phosphate ore sites and 29 active mining licenses, including 15 for building material quarries and 14 for mineral exploitation.

Beyond mining, the Northern Borders region is expanding its industrial footprint, with 61 factories operating across Arar, Tarif, and Rafha in sectors such as building materials, food processing, and chemicals, Al-Jarrah said.

The developments come as minister of industry and mineral resources Bandar bin Ibrahim Al-Khorayef began a visit to the region on Feb. 16 to assess industrial and development projects aimed at strengthening its role as a mining hub. His visit aligns with the ministry’s broader strategy to attract investment and position mining as a key sector in Saudi Arabia’s economic diversification.

Saudi Arabia’s mining ambitions have gained significant momentum in recent years. At a meeting in July, Alkhorayef highlighted that the estimated value of the Kingdom’s mineral wealth had surged from $1.3 trillion to $2.5 trillion by early 2024 — a 90 percent increase — driven by government investments in geological surveys, exploration, and private sector participation. 

The rise in valuation reflects a more comprehensive understanding of the country’s vast mineral potential, as well as increasing demand for critical minerals needed for global energy transitions.