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Saudi central bank's foreign assets plunge again

posted onJune 3, 2020
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Saudi Arabia's foreign reserves fell again in April, as the kingdom's sovereign wealth fund spent overseas. Net foreign assets of the central bank, known as the Saudi Arabian Monetary Authority (SAMA), dropped to $443.75 billion in April from $464.64 billion in March, according to data published on Sunday. They had fallen by $23.9bn in March—their fastest rate in at least 20 years.

That decline came as SAMA transferred 150 billion riyals ($40bn) to the Public Investment Fund (PIF) over March and April for financing an investment spree of international stocks amid the coronavirus crisis. 

"This procedure was taken after comprehensive study and taking into consideration the sufficient level for foreign-currency reserves,"  Finance Minister Mohammed Al-Jadaan said in a statement.

In the first quarter of this year, Saudi Arabia's $325bn PIF invested billions of dollars in companies like the world’s biggest cruise line operator Carnival, oil giants BP, Royal Dutch Shell, Total and Boeing, Citigroup, Disney and Facebook.

Other Gulf investment funds, including Abu Dhabi’s Mubadala and the Qatar Investment Authority also went into a opportunistic buying spree betting on stocks beaten down by the pandemic. 

Riyadh's move to finance the PIF’s activities comes as the Arab world's biggest economy is battling a double crisis: coronavirus and the oil price plunge.

The oil-rich kingdom, 87% of whose budget revenues come from the petroleum sector, 
saw oil revenues in the first three months of the year posting a 24% annual decline to $34 billion, pulling down total revenues by 22%. 

Last month a series of “painful” economic measures were taken by the government to deal with the crisis. Saudi Arabia's state news agency said VAT will increase from 5% to 15% as of 1 July, while the cost of living  allowance of 1,000 riyals ($267) per month to state employees is suspended from 1 June. 

Amid the deteriorating situation Saudi Arabia is also raising billions in debt from the bond market as its budget deficit is forecast to hit double-digits this year. 

On Monday (June 01), SAMA said it would inject SR50bn ($13.3bn)  in the banking system to enhance the liquidity in the sector and help lenders support private businesses. 

The new package marks the second round of monetary assistance provided by SAMA since March when it announced a SR50bn banking stimulus focused on supporting small and medium-sized businesses (SMEs) to help them maintain jobs.