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29 March 2024

Saudi investment income falls

Saudi Arabia’s foreign assets are controlled by SAMA, which said last year a large part of the funds are based in low-risk investments. (SUPPLIED)

Published
By Nadim Kawach

Saudi Arabia earned more than SR34 billion from its overseas investments in 2009, with the income remaining high despite a decline in the assets from their peak at the end of 2008, according to official data.

The income last year was slightly below the record high asset earnings in 2008 but remained at one of its highest levels on the basis of strong oil prices, showed the figures by the Saudi Arabian Monetary Agency (SAMA).

SAMA, the Gulf Kingdom’s central bank, put the government’s investment income at SR34.5 billion in 2009 compared with nearly SR36.3 billion in 2008, its highest ever level. But the 2009 income was way above that in previous years, when it stood at SR26.1 billion in 2007 and SR16.4 billion in 2006.

During the first quarter of 2010, investment income was estimated at about SR10.7 billion compared with only SR2.18 billion in the fourth quarter of 2009, SAMA said in its quarterly economic bulletin released this week.

Saudi Arabia’s foreign assets are controlled by SAMA, which said last year a large part of the funds are based in low-risk investments.

SAMA’s assets plunged to around SR1,570 billion at the end of 2009 from a record high of nearly SR1,709 billion at the end of 2008 because of lower oil prices and withdrawals by Riyadh to cover its budget deficit, which stood at nearly SR87 billion, according to official figures.

The shortfall in 2009 was in sharp contrast with the record high fiscal surplus of nearly SR581 billion in 2008, when the world’s dominant oil power and largest Arab economy netted its highest crude export income of SR1,100 billion.

An improvement in oil prices in 2010 allowed Saudi Arabia, which controls over a fifth of the world’s proven crude deposits, to replenish its foreign assets as they gained around SR72 billion to reach SR1,642 billion at the end of September.

The assets were as low as 619 billion at the end of 2005 before they started their rapid climb in the following years following a steady rise in oil prices.

SAMA’s figures showed most of its foreign assets are concentrated in bank deposits and investment in foreign securities, which stood at about SR293.6 billion and SR1,158.7 billion respectively at the end of September.

The surge in foreign assets has allowed Saudi Arabia to meet its growing financial obligations in the aftermath of the 2008 global fiscal distress and avert borrowing to fund its budget shortfall.

As a result, the Kingdom’s public debt has sharply been trimmed over the past few years to reach one of its lowest levels of around SR225 billion at the end of 2009 compared with 237 billion at the end of 2008 and as high as 660 billion at the end of 2003. It is projected to fall to SR220 billion at the end of 2010.

Announcing its budget for 2010 in late 2009, Saudi forecast a deficit of SR70 billion but analysts believe the actual balance would be in surplus by the end of 2010 despite a sharp rise in actual expenditure.

In a study last month, the Riyadh-based Jadwa Investments expected high oil prices, averaging above $70 in 2010, to expand Saudi Arabia’s official foreign assets to their highest level at the end of 2010.

From around $474.2 billion at the end of 2009, the assets controlled by the Saudi Arabia Monetary Agency (SAMA) and affiliated establishments are projected to climb to nearly $518.5 billion at the end of 2010, it said.

The assets could continue their rise to reach about $550.3 billion at the end of 2011, their highest ever level, the company said.

Strong oil prices also sharply widened Saudi Arabia’s current account surplus, which swelled to a record high of SR496 billion in 2008 before it dipped to nearly SR78.5 billion in 2009 following a 35-dollar drop in crude prices and a cut of more than one million bpd in the Kingdom’s oil output.

SAMA’s report estimated the surplus at around SR73 billion in the first quarter of 2010 compared with nearly SR63.7 billion in the fourth quarter of 2009.