Saudi boosts foreign investments by SR83bn

Saudi Arabia boosted its investments in foreign securities by more than SR83 billion (Dh304.61bn) in the first five months of 2010 as the world's top oil exporter continued to benefit from higher oil prices to build up its foreign assets.

Official data showed the increase in such investments was at the expense of deposits with banks abroad as they plunged by around SR45bn. From SR1,071.5bn at the end of 2009, the kingdom's investments in foreign securities soared to nearly SR1,155.1bn at the end of May, showed the figures by the Saudi Arabian Monetary Agency (Sama), the country's central bank, which controls those assets.

But bank deposits slumped from a record high of around SR335.6bn to nearly SR290bn in the same period.

The surge in securities investment boosted Sama's overall assets to SR1,611.08bn at the end of May from SR1,570.6bn at the end of 2009. In May alone, the assets swelled by around SR6bn after falling by SR5.6bn in April.

Analysts said the increase in the overall assets in the first five months is an indication that the kingdom recorded a fiscal surplus during that period although it is believed to be overshooting budgeted spending. They noted that oil prices averaged around $70 during the first five months of 2010, nearly 40 per cent above Riyadh's forecast of $50 a barrel. Despite higher expenditure, part of ongoing post-crisis fiscal expansion measures, most financial institutions in the kingdom expect a projected SR70bn deficit in the budget to turn into an actual 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, to earn around SR626bn in 2010, nearly 39 per cent above the budgeted revenues of SR470bn. But it also expected Riyadh to exceed spending to a record high of SR603bn against planned expenditure 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 higher oil prices. 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.

Sama is one of a handful sovereign wealth funds that have averted sharp losses in the aftermath of the 2008 global fiscal crisis as the bulk of its assets are based in US government treasury bills away from volatile world stock markets.

In recent press comments, Sama's Deputy Governor Abdul Rahman Al Humaidi, said the central bank would pursue its conservative investment policy.

"Al Humaidi affirmed that the kingdom would continue its conservative monetary policy in the coming stage," the Saudi media reported.

"He considered this policy as a major factor in allowing the kingdom to avoid the severe effects of the global crisis as was the case with other economies."

Sama's May bulletin showed its assets plunged by about SR139bn during 2009 after leaping by nearly SR513bn through 2008. Analysts attributed the surge in 2008 to the sharp rise in oil prices while the 2009 decline was caused by lower prices and higher budgetary spending. Saeed Al Shaikh, chief economist at the Saudi National Commercial Bank, said in a recent study: "Sama has always followed a conservative investment policy as most of its assets are concentrated in safe US treasury bills away from volatile stock markets and restructured products. This has enabled Sama to preserve the value of its net foreign assets and kept it in a much better position than the other Gulf investment organizations, which have accumulated nearly 40 per cent of their assets in financial markets."

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