Saudi Arabia’s foreign reserves have hit record lows from a peak of $737 billion in August 2014 and are falling by at least $12 billion a month at current levels.
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The Financial Times reported that the foreign reserves of the kingdom’s central bank, Saudi Arabian Monetary Agency’s (Sama), have fallen by $71 billion, which amounts to nearly all of the $72.8 billion decline in the country’s overseas assets. The government is accelerating bond sales to help sustain spending.
Sillitoe said it’s hard to determine when Saudi Arabia will “be back in the market to give new mandates” to fund managers.
However, another fund manager said: “We are not that surprised, SAMA has been on high risk for a while and we were prepared for this”.
Although performance varies considerably among Saudi Arabia’s 34 locally incorporated insurance companies, Standard & Poor’s Ratings Services considers that the general trend is a positive one, encompassing improving tariffs, increasing earnings, enhanced capitalization, and growing total premium volumes. The world’s richest nation on a per capita basis plans to channel about US$35 billion of investment into the USA over the next five years as it seeks to move away from European deals.
With spending forecast to reach 1,082 billion riyals (more than $270 billion) this year, Saudi Arabia’s fiscal deficit could rise to around $140 billion or 20% of GDP, according to the International Monetary Fund.
The kingdom’s finances are depleted at an alarming rate by continued subsidies, handouts to public sector workers in order to keep dissent in check, the Yemen war and a patronage system which has expanded over years.
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By contrast, Qatar has about 2.4 million people and isn’t forecasting a deficit this year. Given the fall of oil prices, the Saudis withdraw assets, worth dozens of billions dollars, from investment funds.
