The International Monetary Fund has recommended that Saudi Arabia consider alternative exchange regimes to its 22-year currency peg to the US dollar if inflation persists and the creation of a Gulf monetary union is delayed.

The IMF said in a public information notice published on its website on Tuesday that the peg had provided a “credible anchor that has contributed to macroeconomic stability”. It said that most of the Fund’s directors believed the benefits of maintaining the peg outweighed the cost of higher short term inflation. But it added that a number of its directors felt that “all policy options”, including other exchange rate regimes, should remain under review given the riyal’s undervaluation and the limited role of monetary policy.