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28 March 2024

Saudi foreign assets soar in October

From around SR1,642.2 billion at the end of September, the foreign assets controlled by the Saudi Arabian Monetary Agency. (AFP)

Published
By Nadim Kawach

Saudi Arabia’s foreign assets surged by nearly SR21 billion in October to record their largest increase through 2010 as oil prices were at one of their highest levels in more than a year, official data showed on Tuesday.

From around SR1,642.2 billion at the end of September, the foreign assets controlled by the Saudi Arabian Monetary Agency (SAMA), the Gulf Kingdom’s central bank, swelled to nearly SR1,663.1 billion at the end of October, their highest level since the start of 2009, SAMA said in its monthly bulletin.

It was the largest increase in SAMA’s assets for far this year and it indicated that the world’s oil superpower is earning more than it is spending, which means the forecast budget deficit would likely turn into a surplus by the end of the year.

Saudi Arabia has assumed an oil price of around $50 a barrel in its 2010 budget but oil prices remained at least $20 above that level over the past few months before averaging around $82 in October, their highest level in more than a year.

The increase in SAMA’s assets in October was caused by a surge in its deposits with foreign banks as they swelled from nearly SR293.6 billion at the end of September to around SR335.8 billion at the end of October.

Investment in foreign securities, which had steadily grown over the previous months, dipped from SR1,158.7 billion to SR1,151.7 billion in the same period.

Strong oil prices in 2010 have kept SAMA’s assets at high levels although they slipped in April and June. But at the end of October, they were nearly SR93 billion above their level of SR1,570 billion at the end of 2009.

Analysts said the surge in the assets in October indicated Saudi Arabia’s earnings have surpassed its actual expenditure despite expectations the Gulf Kingdom is again overshooting spending by at least 15 per cent as part of a fiscal expansion policy triggered by the 2008 global financial distress.

Saudi Arabia, which controls more than 20 per cent of the world’s extractable oil deposits, projected a budget deficit of around SR70 billion in 2010 but experts believe the balance would turn into a surplus.

According to the Riyadh-based Jadwa Investments, the surplus could be around SR22 billion compared with an actual shortfall of SR87 billion in 2009.

But Banque Saudi Fransi (BSF) appears more optimistic as it projects a surplus of SR41 billion due to a sharp rise in revenue because of high oil prices. In a study issued this week, it forecast revenue at nearly SR658 billion, far higher than the forecast SR470 billion and the actual revenue of SR510 billion in 2009.

“Whatever scenario may evolve in the coming months globally, this substantial cushion will shield Saudi Arabia’s economy from contagion and enable the state to continue spending heavily to push forward its $384 billion five-year development plan,” BSF chief economist John Sfakianakis said.

 Saudi Arabia basked in its highest ever fiscal surplus of around SR581 billion in 2008 when oil prices peaked at an average $95 a barrel and Riyadh’s crude output was nearly one million bpd above its 2009 production.

SAMA’s assets have steadily increased over the past few years because of strong oil prices, which allowed the Kingdom to record massive fiscal and current account surpluses after several years of deficits.

From around SR619 billion at the end of 2005, the assets leaped to nearly SR884 billion at the end of 2006 and to around SR1,196 billion at the end of 2007. They hit an all time high of SR17,09 billion at the end of 2008 before receding to nearly SR1,570 billion at the end of 2009. They rebounded to about SR1,605 billion at the end of February because of stronger oil prices.

In its study, Jadwa Investments expected high oil prices to boost SAMA’s foreign assets by nearly SR154 billion through 2010 to climb to a record SR1,905 billion by the end of the year. It projected the assets to maintain their upward trend to peak at an all time high of nearly SR2,043 billion at the end of 2011.