Arab officials take economic crisis measures

Arab governments announced emergency economic measures Sunday as stock markets opened the week's trading sharply down and the IMF and World Bank held annual meetings in Washington against a backdrop of the worst financial crisis since the 1930s Great Depression.

The United Arab Emirates said Sunday it will guarantee deposits and savings in local banks to protect depositors in face of the global financial turmoil while a royal adviser in Saudi Arabia recommended emergency measures to spare ordinary citizens from the steep bourse decline, local press reported.

Emergency measures

The UAE cabinet decided to ensure that no local bank will be exposed to credits risks and to guarantee inter-bank lending among all banks operating in the country, state WAM news agency reported.

The UAE, the first oil-rich Gulf country to take drastic measures to protect depositors from the global financial meltdown, will pump the necessary liquidity into the banking system if required, WAM said.

The measures came as the Group of 20 countries, which account for 85 percent of the global economy, said they had agreed to use "all financial and economic tools" to calm the storm amid grim warnings of a "meltdown" and European leaders pledged their own action ahead of a crisis summit Sunday.

The 20 nations endorsed a five point plan agreed by the Group of Seven (G7) industrial powers at the weekend meetings in Washington to prevent the "failure" of key financial institutions.

In Saudi Arabia, Abdul-Rahman al-Zamil, a member of the Shura Council economic committee and also a former government minister, said the government should deploy emergency measures, such as buying into falling stocks or allowing share buybacks, to spare ordinary citizens losses from weeks of bourse declines.

The Arab world's worst performing stock market closed on Saturday at its lowest level in more than four years amid concerns over the global financial crisis.

"Our leadership must start suggesting measures because we can't afford to leave things as they are. The government is concerned," Zamil told Reuters.

Earlier on Sunday, Okaz newspaper quoted Zamil saying that he expected the government to buy into the falling local stock market and that this would be part of "urgent and exceptional" measures in line with those taken by other countries such as Japan, the United States and the European Union.

Saudi Arabia, the world's largest oil exporter, has sought to make the stock exchange a platform for wealth distribution through a raft of initial public offerings, often at discounted prices.

Zamil suggested that the government should spend 100 billion riyals ($26.7 billion) on buying high-yield stocks to "rescue" the bourse, and said he would try to float these proposals when the council meets Sunday.

Turmoil and panic

Gulf economists have attributed the slide in the Gulf markets to panic from the impact of the global financial turmoil that has strongly shaken investor confidence and led to a wave of sell-offs.

They also said investors were worried over the fate of Gulf government and private foreign investments, estimated at $2.5 trillion.

The massive drop in oil prices also appears to have weighed heavily on the markets in the region, which pumps about 16 million barrels per day. Crude prices closed in New York Friday below 80 dollars a barrel.

Oil income of the six Gulf states is estimated to have dropped by one billion dollars every day from its level in July when oil prices peaked above 147 dollars a barrel.

On Friday, the World Bank warned that a significant drop in oil prices would bring down the level of economic growth in oil-exporting countries.

U.S. President George W. Bush said on Saturday, after crisis talks with G7 finance ministers, that all agreed the world financial meltdown required "a serious global response."

Our leadership must start suggesting measures because we can't afford to leave things as they are. The government is concerned

Abdul-Rahman al-Zamil, a member of the Saudi Shura Council