Saudi assets gain over SR40 bn in June

Strong oil prices and a surge in the country’s crude output boosted Saudi Arabia’s foreign assets by more than SR40 billion in June to push them to their highest ever level, official data showed on Saturday.

Experts believe the increase in June and in previous months this year indicates the largest Arab economy is earning more than spending and this means a budgeted fiscal deficit could turn into a surplus by the end of the year.

From SR1,856.2 billion ($495 billion) at the end of June, total foreign assets controlled by the Saudi Arabian Monetary Agency (SAMA), the Gulf Kingdom’s central bank, soared to an all time high of SR1,897 billion ($505.8 billion) at the end of June, SAMA said in its monthly bulletin for July.

The increase meant that Saudi Arabia’s foreign assets swelled by a whopping SR192 billion in the first half of 2011, the biggest increase in such a period of time, according to financial analysts in the world’s top oil exporter.

The surge was a result of a sharp rise in oil prices, which averaged nearly $109 in June, nearly $50 above Saudi Arabia’s budget forecasts. The country’s oil production has also shot above nine million bpd from around 8.3 million bpd through 2010 as the Kingdom sought to offset disruption of crude supply from Libya as a result of the war in the north African OPEC nation.

A breakdown showed SAMA’s deposits with banks abroad grew from SR360.1 billion at the end of May to SR372.5 billion at the end of June. Investment in foreign securities swelled from SR1,293.8 billion to SR1,321.3 billion.

Foreign currencies and gold rose from SR154.5 billion to SR156.5 billion while other “miscellaneous” assets slipped to SR23.3 billion from SR24 billion.

Saudi Arabia’s foreign assets have steadily grown in most of the past few years as a result of higher oil prices, gaining nearly SR135 billion through 2010.

They recorded one of their largest increases of nearly SR513 billion during 2008, when oil prices climbed to their highest annual average of nearly $95 a barrel. But a sharp fall in crude prices depressed them by SR139 billion in 2009 to widen the actual budget shortfall to nearly SR87 billion following a record high surplus of nearly SR580 billion in the previous year.

In 2010, the budget reverted into a surplus of SR109 billion after oil prices increased by at least $15 a barrel. For 2011, 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 six months of 2011, crude prices averaged nearly $100 a barrel and could remain relatively high through 2011.

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 four months.

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