Riyadh boosts overseas investment in Q1

Saudi Arabia boosted its investments in foreign securities by nearly SR55 billion (Dh54.5bn) in the first quarter of 2010 despite a sharp rise in budgetary spending, official data showed yesterday.

But deposits with foreign banks by the Saudi Arabian Monetary Agency (Sama), the Gulf country's central bank, slumped by nearly SR17bn in the same period, Sama said in its March bulletin.

From around SR1.07 trillion at the end of 2009, Sama's investments in foreign securities swelled by around five per cent to SR1.126trn at the end of March, the report showed.

The surge in investment boosted the total foreign assets of the world's top oil exporter by SR40bn to SR1.61trn at the end of March from SR1.57trn at the end of 2009. The increase in total assets followed a decline of nearly SR139bn in Sama's assets through 2009 because of lower oil prices and budgetary commitments within the Gulf country's ongoing fiscal stimulus to counter the effects of the 2008 global financial distress.

Analysts said the rise in Sama's assets in the first quarter despite increased expenditure was a result of a surge in oil prices, which averaged above $70 during that period, far higher than the $45 oil price assumed in the budget.

Saudi Arabia, the largest Arab economy, forecast a budget deficit of SR70bn in 2010 after it boosted spending to a record high level but analysts in the Kingdom believe the gap would turn into a surplus by the end of the year.

According to the Riyadh-based Jadwa Investments, the 2010 budget would record a surplus of around SR23bn due to a sharp rise in revenue.

It expected the Kingdom, which controls over a fifth of the world's proven oil deposits, o earn around SR626bn in 2010, nearly 39 per cent above the budgeted revenues of SR470bn.

The report said it also expected Riyadh to again overshoot budgeted expenditure to a record high of SR603bn against planned spending of SR540bn.

In a recent study, a key Saudi bank expected Sama's assets to surge by nearly 14 per cent at the end of this year because of an expected rise in oil prices to an average $70 from around $60 in 2009.

Banque Saudi Fransi (BSF) said the increase this year would follow a decline by around 12 per cent in those assets because of heavy withdrawal by the government to meet growing spending commitments at home.

"The size of those assets receded in 2009 because of the dual impact of lower oil export earnings and higher public spending," BSF 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 increase, we expect those assets to rise by 14 per cent to reach nearly SR1.67trn at the end of 2010."

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 gradually slash the debt in the following years. At the end of 2009, the debt stood at SR225bn, according to Sama.

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