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Saudi foreign assets dip after dollar surge

DUBAI, July 1, 2015

The net foreign assets at Saudi Arabia’s central bank fell to SR2.521 trillion ($672.2 billion) in May, down by $6.6 billion or one per cent from the previous month as the kingdom continued to draw down reserves to cover a budget gap caused by cheap oil.

The assets dropped by 8.1 per cent from a year earlier to their lowest level since April 2013, central bank data showed yesterday, said a report in the Gulf Daily News (GDN), our sister publication.

The central bank serves as the country’s sovereign wealth fund, storing its earnings from oil exports.

Assets’ year-on-year drop is partly due to the strong US dollar, which has cut the value of the portion denominated in non-dollar currencies, but a major part is due to a fiscal drawdown, analysts say.

Assets fell by $11.8 billion in April from the previous month, by $16 billion in March and by $20.2 billion in February. They peaked at a record $737 billion last August.

Although the pace of decline has been slowing, this may be temporary as the Saudi government will need to find more money in coming months.

The International Monetary Fund predicts that if oil prices stay in their recent range – Brent crude is now around $62 a barrel – the government will run a fiscal deficit of around 20 per cent of gross domestic product this year, equivalent to roughly $150 billion.

The assets are held mainly in the form of deposits with banks abroad, which totalled $96.8 billion at the end of May, and foreign securities such as US treasury bonds, which totalled $515.8 billion. - TradeArabia News Service




Tags: Saudi | assets | Dollar | DIP | surge | foreign |

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