Wednesday, Aug 08, 2012
DUBAI (Zawya Dow Jones)--Net foreign assets of the Saudi central bank are set to rise sharply by the end of 2012, boosted by the kingdom's buoyant oil revenues, according to new figures released by the International Monetary Fund.
In its latest Article IV review of Saudi Arabia's economy, published late Tuesday, the IMF said that "higher oil revenues have strengthened fiscal and external balances and have boosted social spending and savings for future generations."
Saudi Arabia's oil production is running close to record levels around 10 million barrels a day, as the kingdom has sought to keep global prices at reasonable levels at a time when Iranian production has dropped sharply due to international sanctions.
The IMF projected that the Saudi central bank's net foreign assets will rise to $701.8 billion by the end of 2012, up 19% from the last-reported figure of 2.216 trillion Saudi riyals ($591 billion) reported by the Saudi Arabian Monetary Agency at the end of June this year. SAMA's net foreign reserves stood at SAR2.007 trillion at the end of 2011.
Saudi Arabia's net foreign assets have increased steadily since 2009, when they dipped from a year earlier on the back of the global financial crisis.
The IMF said that Saudi Arabia's 2012 oil and refined products exports are expected to reach $361 billion, up nearly 14% from $317.9 billion in 2011.
But despite the strong fiscal buffers created by massive oil revenues, the IMF cautioned Saudi Arabia about the rapid increase in public spending this year, saying it continued to be "above the level consistent with an intergenerationally equitable drawdown of oil wealth."
To achieve that, the international body advised the Saudis to ensure greater efficiency in spending, and to broaden the country's tax base.
Stepped-up spending on education, health care and other social programs dominated Saudi Arabia's SAR690 billion budget for 2012.
The IMF expects the kingdom's real GDP growth to slow to 6% this year, from 7.1% in 2011. Inflation is expected to hold steady at 5.2%, up only slightly from 5% in 2011, thanks to reduced food inflation, the IMF said.
-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; firstname.lastname@example.org; Twitter: @ZDJnews
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