In recent years, the performance of Saudi Arabia's economy has been strong by all standards. Indeed, the International Monetary Fund (IMF) has assessed Saudi Arabia as one of the best performing G20 economies. Saudi Arabia also fares well among the G20 economies with regard to the strength of its sovereign and external balance sheets. Government debt has declined to 2.7% of GDP, government deposits at the Saudi Arabian Monetary Agency (SAMA) have been built up to about 60% of GDP or 20 months of spending, and substantial external assets have been accumulated.

In view of the strong fundamentals, prudent macroeconomic management and significant buffers, the Saudi economy has not been affected either by recent global market volatility or by regional geopolitical events. These positive developments were recently recognised by Fitch Ratings, which upgraded Saudi Arabia's sovereign credit rating from 'AA-' to 'AA' with a 'stable' outlook.

Maintaining momentum

The outlook for the Saudi economy remains favourable, benefiting from strong private sector activity and government spending on transportation infrastructure, housing projects, and the Mecca and Medina expansion. However, my government is committed to the further diversification of the economy, while boosting sustainable growth under the forthcoming 10th Development Plan (2015-2019), which is being finalised.

Over the medium term, Saudi Arabia aims to maintain a sustainable economic growth path through deepening and accelerating the pace of economic diversification, expanding the absorptive capacity, increasing the contribution of the private sector and improving its productivity, and reducing unemployment among Saudi nationals by creating suitable and sufficient job opportunities. Saudi Arabia also plans to maintain the mechanisms for minimising social disparities through raising the standard of living and quality of life of all segments of society, supporting individual initiatives, and enhancing social security. Fiscal policy has been playing a key role in the development of the Saudi economy and supporting higher living standards, given large public investments in infrastructure, education and social programmes.

This momentum will be maintained as many development projects have been approved to further strengthen existing infrastructure, including roads, railroads, airports, telecommunications, water and electricity, health and education services. A significant amount of credit is also being extended to the private sector through the five Specialised Credit Institutions (SCls), including to the small and medium-sized enterprise (SME) sector, which will further promote the private sector's role, particularly in creating job opportunities for Saudi nationals.

We will continue to increase the capital of SCIs in line with the growing demand for loans granted by these institutions. A sound financial system is essential for the sustainability of economic growth and development and increasing employment opportunities. Here, we are pleased to underscore that Saudi Arabia is maintaining the soundness of its financial sector and SAMA makes continuous efforts to further strengthen financial sector supervision and boost financial inclusion.

Creating job opportunities

The Saudi banking system remains profitable, liquid and well capitalised, and is well equipped to deal with spillover risks, including from potential increase in global interest rates and any downside risks arising from slower non-oil growth. At 17.9% at the end of 2013, risk-weighted bank capital ratios are high. Non-performing loans have continued to decline to 1.3% of loans in 2013, while bank profitability remains high. Saudi Arabia was among the first countries to implement the Basel III risk-based capital standards in January 2013, it has implemented the Basel III liquidity standards in July 2013, and the leverage ratio has been monitored at a minimum of 3% since January 2011.

The insurance sector has witnessed a quantum leap over the past few years, as better provision of insurance services at competitive prices have helped realise high growth rates. The capital market is building momentum in financing Saudi corporates and offering investment opportunities. We are also exploring ways to deepen the debt market to help increase financing options. Saudi Arabia plans to open its stock market to direct investment by foreign financial institutions in the first half of 2015.

Boosting the private sector employment of Saudi nationals remains an important priority for my government. The implementation of effective labour market reforms in recent years have resulted in a substantial increase in the recruitment and participation of Saudi nationals in the private sector. An unemployment insurance system (Sanid Programme) is being introduced this year to strengthen the social safety net for Saudi nationals and will lead more of the country's young workforce to seek employment in the private sector.

Improvement all areas

The ongoing large investments in educating Saudi nationals, both domestically and abroad, aim to provide opportunities for private sector employment. Training programmes are being enhanced to improve skills of workers already in the labour force. Going forward, the objectives are to further strengthen policies to increase labour force participation as well as promote effective and efficient labour activation programmes. Employment opportunities for female workers will be further enhanced through increasing their participation in the retail sector, establishing affordable childcare facilities, and offering flexible working hours and arrangements.

Expanding the supply of affordable housing is an important goal for my government, given its role in improving the population's standard of living. The implementing regulations of the Real Estate Finance Law are expected to promote sustainable real estate financing by creating the necessary institutional framework. This will promote growth in the sector and in the domestic economy.

The regulations set a maximum limit on real estate financing, which will help in mitigating risks. The regulations also set up a regulatory framework for real estate refinancing, thereby establishing a secondary market that will contribute to providing the necessary liquidity and reducing the cost of financing to the consumer. The greater private sector involvement in the supply of housing will give further boost to private sector activity in the country.

Reaching out to SMEs

The SME sector enjoys major support in the country. The Saudi Credit and Saving Bank is making significant efforts to coordinate and provide financing for this sector. In addition, the government and banks have jointly created an SME Credit Guarantee Programme that is managed by the Saudi Industrial Development Fund to support access to credit.

The main objective of the programme is to provide SMEs with greater access to bank credit by reducing cost to borrowers and exposure risk of banks. However, the programme's activities are not only limited to the issuance of guarantees to SMEs, but also encourage the training, education and professional development of SME owners and related parties. The programme also aims to enhance information flows between SMEs and financing institutions and to strengthen SMEs' competitiveness through improvements in infrastructure and use of technology.

Furthermore, banks have been encouraged to establish SME departments to provide SMEs with various products and services tailored to their business needs. Despite its vast oil resources, Saudi Arabia is making considerable efforts to lay the foundation for further diversification and boost sustainable growth. Saudi Arabia scores well across a number of doing business indicators, but reforms will continue to further enhance the business environment and the role of the private sector in the economy.

A large number of structural reforms have been implemented over the past two decades and efforts are continuing in a number of areas, including significant investments in human capital and physical infrastructure, increased SME financing, the development of industrial clusters around oil and mining, and joint ventures in refining, mining and banking. The implementation of these reforms will continue to yield tangible outcomes, particularly with regard to the increased share of non-oil real GDP.

While the development and modernisation of the Saudi economy and the creation of employment opportunities for Saudi nationals remain the priorities of my government, Saudi Arabia is conscious of its global and regional responsibilities. In this connection, Saudi Arabia continues to contribute to the global economy by playing its systemic and stabilising role in the global oil market. Saudi Arabia also has been a significant contributor to multilateral programmes to promote global financial stability and to support low-income countries. In addition, Saudi Arabia provides generous financial assistance to countries in the Middle East region and beyond.

Ibrahim Abdulaziz Al-Assaf is Saudi Arabia's minister of finance.