Saudi foreign reserves fall slows after bond sale
DUBAI, August 28, 2015
The speed of decline in Saudi Arabia's foreign reserves slowed in July after the government began issuing domestic debt to cover part of a budget deficit created by low oil prices, central bank data showed on Thursday.
The world's largest oil exporter has been drawing down its reserves to cover the deficit. Net foreign assets at the central bank, which acts as the kingdom's sovereign wealth fund, have been sliding since they reached a $737 billion peak last August.
But the latest data showed net foreign assets shrank only 0.5 per cent from the previous month to SR2.48 trillion ($661 billion) in July, their lowest level since early 2013. They had dropped 1.2 per cent month-on-month in June and at faster rates early this year.
In July, the government began selling bonds for the first time since 2007, placing SR15 billion ($4 billion) of debt with quasi-sovereign funds; this month it sold SR20 billion of bonds to banks.
The domestic debt sales appear to have reduced the need for the government to cover its deficit by drawing down foreign assets.
Authorities have not publicly said how many bonds they will issue in future, but the market is expecting monthly issues of roughly SR20 billion through the end of 2015.
The foreign assets are held mainly in the form of foreign securities such as US Treasury bonds - securities totalled $465.8 billion at the end of July - and deposits with banks abroad, which totalled $131.2 billion. The vast majority of the assets are believed to be in US dollars.
Early this year, the central bank drew down its foreign bank deposits. But the July data showed it has changed its strategy in the last two months, rebuilding its foreign deposits while selling foreign securities more actively.
Securities shrank 3.6 per cent month-on-month in July while deposits expanded 9.6 per cent to their highest level this year. - Reuters
