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NEWS BY COUNTRY News & Analysis>
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| Saudi foreign assets decline by SR225bn |
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04 November 2009
Saudi Arabia had slashed its foreign assets by SR225 billion (Dh220b) in the first nine months of 2009 to fund its record state budget and mitigate the impact of the global financial turmoil, official figures showed yesterday.
The withdrawal from the assets, controlled by the Saudi Arabian Monetary Agency (Sama), the kingdom's central bank, stopped in July because of a surge in oil prices but resumed in the following month as the country appears to be largely overshooting assumed expenditure.
The assets declined by nearly SR10bn at the end of September after gaining SR2bn in August, Sama's monthly bulletin showed.
The withdrawal in September brought to SR225bn the total funds used by the government apparently to finance its record budget, which is intended to offset the downward pressure of the global crisis on domestic growth.
From SR1.709 trillion at the end of 2008, Sama's total assets slumped to about SR1.484trn at the end of September.
Saudi Arabia, the world's dominant oil power, stepped up withdrawal from its overseas assets in the first half of 2009 because of high spending and relatively weak oil prices. The pace of withdrawal sharply slowed down in the following months after a sharp rise in crude prices, which are now nearly double their January average of around $40 a barrel.
A large part of the funds withdrawal this year were from Sama's deposits with banks abroad as they dipped to about SR238bn at the end of September from nearly SR379bn at the end of 2008.
The report showed investments in foreign securities dropped to about SR1.071trn from SR1.154trn in the same period. Other assets declined to SR22.3bn from SR28.1bn while foreign currencies and gold grew to SR127.1bn from SR121bn. Notes fell to SR25.2bn from SR27bn.
Saudi Arabia has assumed a price of around $50 for its crude in its 2009 budget but the price of Opec's basket has so far averaged about $60.
In a bid to counter downward pressure on its economy because of falling oil prices and global credit tightness, Riyadh approved a record budget of SR475bn for 2009, creating a deficit of SR65bn.
But key Saudi banks believe the kingdom, sitting atop a quarter of the world's oil, has again overshot projected spending despite an expected steep fall in its 2009 income because of lower prices and a cut of about one million barrels per day in its crude supplies in line with a collective Opec agreement.
Forecasts by the National Commercial Bank (NCB), Saudi Arabia's largest bank by assets, showed actual public spending could swell to SR521bn from a projected SR475bn. But the bank also expected revenue to climb to about SR546bn from an assumed SR410bn.
Analysts said the kingdom, the Arab World's largest economy, chose to use its assets to avoid putting further pressure on its fragile liquidity situation.
"The government's robust response to the domestic slowdown can be comfortably accommodated by its financial resources: at end 2008 official net foreign assets were $440bn (equivalent to 95 per cent of GDP or 235 per cent of imports of goods and services)," the Saudi American Bank said.
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.
Official estimates showed the Gulf country's public debt dived to only around 13 per cent of the gross domestic product at the end of 2008 from 18 per cent at the end of 2007 and more than 100 per cent at the end of 1999.
By Nadim Kawach
© Emirates Business 24/7 2009
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