Saudi's foreign assets down SR100bn

Saudi Arabia's foreign assets plunged by more than SR100 billion (Dh98bn) in the first quarter of this year as the world's oil superpower is withdrawing funds to meet commitments in its record 2009 budget, official figures showed yesterday.

Although the Gulf kingdom recorded its highest budget surplus in 2008, the foreign assets of its central bank plunged by SR101.5bn at the end of March from around SR1,709.99bn at the end of December, showed the figures by the Saudi Arabian Monetary Agency (Sama), which controls those assets, mostly in the West.

A breakdown showed deposits with banks abroad and investment in foreign securities recorded the largest decline as cash in vault and other miscellaneous assets remained almost unchanged at the end of February.

The decline reversed several years of a steady and rapid growth in Sama's assets because of a sharp rise in the country's petrodollars income.

Sama gave no reason for the decline but crude prices lost nearly $100 in the last few months of 2008 after peaking at $147 in late July. In the first quarter of 2009, prices averaged around $40, below a third of their July level.

"Of course not," Malik Younus, an economist at the Saudi National Commercial Bank (NCB), said, when asked whether the decline in Sama's foreign assets was a result of losses in overseas investment.

"The decline is a result of withdrawal of funds by the government to meet its domestic obligations within its budget allocations for this year…as you know, the kingdom approved a record budget and I think it is honouring its commitment by withdrawing from those deposits to offset low oil prices…in other words, the government is injecting part of the funds it has into the domestic economy."

Sama's figures showed deposits with banks abroad slumped from SR379.4b at the end of December to SR314.9bn at the end of March.

Investment in foreign securities, after remaining unchanged at the end of January, plummeted from around SR1,154.2bn to SR1,114.5bn at the end of March.

Sama's assets recorded their highest growth in 2008, leaping by more than SR500bn since January 1 because of the surge in oil prices and the kingdom's output, which averaged around 9.2 million barrels per day.

The assets dipped to one of their lowest levels of below SR100bn in 1998 before they began their rapid climb to reach SR197bn in 2002. By the end of 2007, the assets had racketed to SR1.196 trillion.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.