Saudi assets up by SR100bn

A surge in oil prices allied with higher output boosted Saudi Arabia’s foreign assets by more than SR100 billion in the first four months of 2011 to push them to a record high level, according to government data.

The bulk of the increase in the assets of the Saudi Arabian Monetary Agency (SAMA), the Gulf Kingdom’s central bank, was in security investments as bank deposits edged up only slightly, SAMA’s figures showed.

From around SRh1,705 billion ($455 billion) at the end of 2010, the total foreign assets controlled by SAMA leaped by SR101.7 billion to SR1,806.7 billion ($482 billion) at the end of April, the figures showed. A breakdown showed SAMA’s investment in foreign securities jumped by around SR85 billion to SR1,267 billion ($337 billion ) from SR1,181.9 billion ($315 billion).

Deposits with banks abroad edged up slightly to around SR344.5 billion ($91.7 billion) from SR343 billion (91.4 billion) in the same period.The monthly bulletin showed there was an increase of around SR16 billion in foreign currencies and gold to reach SR151.8 billion (40.5 billion) while there was a decline by about SRthree billion in currency notes to SR22 billion ($5.8 billion).

Other assets gained nearly SR three billion to rise to SR21.2 billion ($5.6 billion(In a recent study, the Riyadh-based Jadwa Investment said an increase of around SR135 billion in SAMA’s assets through 2010 was below expectations but added this was due to high public expenditure as part of the country’s counter-crisis fiscal expansion measures.

“The increase for the whole of 2010 was below that which would be expected with an average oil price of $80 per barrel due to high public spending.”

The surge in foreign assets in 2010 was a result of higher than expected oil prices, which turned the country’s budgeted deficit into a surplus of nearly SR109 billion compared with a deficit of SR87 billion in 2009 and a record high surplus of SR581 billion in 2008, when oil prices peaked at an average of $95 a barrel.

In late 2010, Saudi Arabia announced another record high budget of SR580 billion for 2011, with a deficit of SR40 billion.But analysts believe the shortfall will again revert into a surplus at the end of the year on the grounds the oil price assumed by Riyadh of just under $60 will be far below the expected actual price.

In the first four months of 2011, crude prices averaged as high as $100 a barrel and could be far higher through the year because of recovering demand and political unrest in the Middle East and North Africa, where oil supplies by OPEC member Libya have been totally disrupted.According to National Commercial Bank (NCB), Saudi Arabia’s largest bank, the 2011 deficit could turn into an actual surplus of around SR77 billion.

“We believe that revenues are underestimated, and the government will still manage to record a surplus in 2011. With our forecast of $80 for the average Arabian light spot prices and an 8.5 million bpd for average oil production in 2011, we project revenues and expenditures at SR753 billion and SR677 billion, respectively. This would lead in turn to a budget surplus of SR77 billion, or 4.2 per cent of estimated GDP in 2011,” NCB said.

It expected actual expenditure to be overshot by around 17 per cent through the year as the government is pursuing post-crisis fiscal expansionary measures, which are aimed at supporting the economy.

But in another study, Banque Saudi Fransi said it expected overspending to be far high, putting it at about 45 per cent, following the announcement of a massive financial handout for citizens by King Abdullah over the past few weeks.

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