Inflation in Saudi Arabia accelerated to a seven-year high of 3.83 percent in July as rents rose in the world largest oil exporter and a currency pegged to the weak dollar helped drive up the cost of food imports.

The cost of living index rose to 105.6 at the end of July, from 101.7 a year earlier, data from the Central Department of Statistics showed on Tuesday. It was biggest increase since 2000 for the index, which has a base year of 1999.

Rents rose 9.8 percent and food costs jumped 5.9 percent, the department said.

Inflation was 3.06 percent in June.

The dollar's slide over the previous 12 months to a record low against the euro in July helped drive up the cost of food imported from Europe, said Giyas Gokkent, head of research at the National Bank of Abu Dhabi.

"The Saudi riyal exchange rate, which has weakened with the dollar against major currencies, has placed pressure on food prices," he said.

Demand for real estate is outpacing supply in most Gulf countries, driving up rents, he said.

Inflation has been accelerating across the Gulf Arab region as governments invest more of their windfall oil revenue in  tourism projects and infrastructure.

Economic growth, powered by a tripling of oil prices since 2002, has driven up real estate costs in the kingdom. Property developer Taiba said in May it had made a 59 percent return on a block of land in the capital Riyadh in just six months.

Neighbouring Kuwait dropped its peg to the dollar in May in favour of one against a basket of currencies to contain inflation.

The Saudi central bank has repeatedly ruled out following suit, saying inflation is largely home-grown. - Reuters