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11 December 2023

Kingdom's foreign assets up in December

Although the Kingdom is again expected to overshoot forecast expenditure in 2010, stronger crude prices will allow Riyadh to replenish its overseas assets. (AFP)

By Nadim Kawach

Saudi Arabia's foreign assets surged by more than SR67 billion (Dh65.6bn) in December to record their first major rise through 2009 after a decline in most of the previous months because of higher spending, official figures showed yesterday.

The assets controlled by the Saudi Arabian Monetary Agency (Sama), the Gulf Kingdom's central bank, ended the year at SR1,570.65bn compared to SR1,503.51bn at the end of November, an increase of SR67.14bn, Sama said in its December bulletin. But the level at the end of 2009 remained far lower than at the end of January 2009, when assets stood at SR1,681.3bn and below the record high assets of SR1,709.9bn at the end of 2008.

Sama gave no reason for the high growth in assets during December but oil prices climbed to one of their highest levels of $74 a barrel during the year, much higher than the $50 price assumed by Riyadh in its 2009 budget.

A breakdown showed the bulk of the increase in December was in Sama's deposits with banks abroad, jumping by around SR57bn to SR335.6bn at the end of December from SR268.9bn at the end of November. Investment in foreign securities slipped to SR1,071.5bn from SR1,075.1bn in the same period but this was offset by a rise of around SR10bn in notes.

The report showed during the whole of 2009, Sama's foreign assets dipped by nearly 8.1 per cent as the world's oil superpower heavily overshot assumed spending and its main oil operator pushed ahead with massive investment plans.

The assets had steadily declined through 2009 before they gained around SR31bn in October apparently after a sharp rise in crude prices, which averaged around $72.6 a barrel compared with only about $40 in the first quarter.

Analysts said the large fall in Sama's assets through 2009 after a sharp increase in previous years was caused by heavy budgetary expenditure and higher spending by the government-owned Saudi Aramco, the world's largest oil producing company which is locked in an expansion programme involving crude capacity, gas, petrochemicals and refining.

In 2009, Riyadh approved a record high budget of SR475bn as it sought to mitigate the impact of the global fiscal distress.

High expenditure created a deficit of SR65bn but the actual shortfall was cut to SR45bn by the end of the year despite overspending by around SR75bn, according to official data.

Sitting atop a quarter of the world's recoverable crude deposits, the Kingdom last month announced another record budget for 2010 as part of an ongoing stimulus programme to maintain growth in its economy, the largest in the Arab region. Economists said Saudi resorted to its assets to avoid putting further pressure on its fragile liquidity situation resulting from the global credit squeeze.

Heavy borrowing by Saudi Arabia in the previous years boosted its public debt to a record SR660bn in 1999 before the surge in oil prices allowed it to slash the debt in the following years.

Official estimates showed the Gulf country's public debt fell to only about 15 per cent of the GDP at the end of 2009 from 18 per cent at the end of 2007 and more than 100 per cent at the end of 1999. Forecasts by a key Saudi bank showed Sama's assets could climb by nearly 14 per cent through 2010 due to an expected increase in oil prices. Although the Kingdom is again expected to overshoot forecast expenditure in 2010, stronger crude prices and higher oil output by the country will more than offset the rise in spending and allow Riyadh to replenish its overseas assets, Banque Saudi Fransi said.

"As for this year, our expectations are that growth in those assets will outpace growth in the Kingdom's nominal GDP. We believe the government will continue to support the expansionary public spending programme but since oil revenues are projected to rise, we expect those assets to increase by 14 per cent to reach nearly SR1.67trn at end-2010."


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