Geithner, who is on a visit to the oil-rich region to meet officials from crucial holders of hundreds of billions of dollars of US debt, stressed the need for spending to restore growth.

"Here in Saudi Arabia, the non-oil economy continues to grow, boosted by one of the largest stimulus packages of any G20 nation and by aggressive monetary and financial sector actions," he said.

"I think the world has yet to fully appreciate the scale of ambition and investment we are seeing in the [Saudi] kingdom and the Gulf region to lay the foundation for future growth," he said.

'Apprehensive' investors

Geithner spoke to businessmen at the Jeddah Chamber of Commerce and Industry before meetings with his Saudi counterparts and King Abdullah, the Saudi monarch.

He is scheduled on Wednesday to meet United Arab Emirates officials and the heads of two of the UAE's main public investment funds in Abu Dhabi.

"[Gulf states] want to hear that the economy is going to do well after the fiscal stimulus ... and that they will not lose their money"

John Sfakianakis, Riyadh-based economist

John Sfakianakis, the chief economist at the Saudi British Bank in Riyadh, told Al Jazeera that Geithner will have to reassure an apprehensive business community "that has seen its investments dwindle" over the past year.

"[Gulf states] want to hear that the economy is going to do well after the fiscal stimulus, that the money they have parked with the US treasury will bear some fruits, and that they will not lose their money," Sfakianakis said.

"The policy makers in the US have a responsibility and they need to say that the measures they have taken are bearing some fruits.

"At the same time, the responsibility is also for the policy makers here to look at the numbers and to see that ... the actual economy is rebounding in the US."

Growing deficit

Countries like Saudi Arabia that buy US treasury bonds have helped to finance America's spending, but the surging US deficit has made bond holders nervous about the value of their investments.

The budget deficit has soared as the US tries to spend its way out of recession [Reuters]
The US federal deficit soared past the $1 trillion mark for the first time this week as the government spends to ease the recession.

The US administration now forecasts that the deficit for the budget year will reach $1.84 trillion by the end of September.

Geithner said that, since the failure of the Dubai Ports World deal, publicly announced direct investment in the US from the Gulf has topped $25bn.

The figure includes the $11bn purchase of GE Plastics by the Saudi Basic Industries Corp, the Sauid petrochemicals giant.

Foreign investment

The Jeddah visit underscores the importance of Saudi Arabia as the leading global oil exporter as well as holder of about $400bn in foreign reserves, most of it believed in dollar-denominated assets.

Because the country is so dependent on oil and gas exports - also denominated in dollars - economists do not believe Riyadh is considering any radical changes to its dollar holdings.

But the Saudi government has been selling off foreign assets in recent months to fund a massive government investment programme aimed at keeping its economy growing.

Saudi foreign assets have dropped from a peak of $443.2bn last November to $395.2bn at the end of May.

And across the six countries of the Gulf Cooperation Council, foreign holdings have fallen around $300bn, which has likely helped to weaken the the dollar.