Kingdom's foreign assets gain around SR62 bn in one month on the back of high oil prices
Strong oil prices boosted Saudi Arabia's foreign assets to an all time high of more than SR1,771 billion at the end of March despite massive public expenditure, according to official data.
The foreign assets of the Saudi Arabian Monetary Agency (SAMA), the Gulf kingdom's central bank, leaped by nearly SR62 billion in just one month to hit a record high of SR1,771.7 billion ($472 billion) at the end of March.
The increase was in both deposits with banks abroad and investment in foreign securities while there was a slight rise in "other miscellaneous assets," SAMA said in its monthly bulletin released this week.
The assets at the end of March were sharply above their level of SR1,709 billion at the end of February and SR1,705 billion at the end of 2010.
A breakdown showed investments in foreign securities surged from SR1,221 billion at the end of February to SR1,246.1 billion at the end of March. Deposits with banks abroad swelled from SR318 billion to SR350.9 billion.
Year-on-year, there was growth of nearly SR161 billion or around 10 per cent because of a surge in oil prices and higher crude output by Saudi Arabia, the world's dominant oil power which controls over a fifth of the global crude wealth.
In a recent study, the Riyadh-based Jadwa Investment said an increase of around SR135 billion in SAMA's assets through 2010 was below expectations but added this was due to high public expenditure as part of the country's counter-crisis fiscal expansion measures.
"The increase for the whole of 2010 was below that which would be expected with an average oil price of $80 per barrel due to high public spending."
The surge in foreign assets was a result of higher than expected oil prices, which turned the country's budgeted deficit into a surplus of nearly SR109 billion in 2010 compared with a deficit of SR87 billion in 2009 and a record high surplus of SR581 billion in 2008, when oil prices peaked at an average of $95 a barrel.
In late 2010, Saudi Arabia announced another record high budget of SR580 billion for 2011, with a deficit of SR40 billion.
But analysts believe the shortfall will again revert into a surplus at the end of the year on the grounds the oil price assumed by Riyadh of just under $60 will be far below the expected actual price of more than $80 a barrel.
National Commercial Bank (NCB), Saudi Arabia's largest bank, projected the 2011 deficit to turn into an actual surplus of around SR77 billion.
"We believe that revenues are underestimated, and the government will still manage to record a surplus in 2011. With our forecast of $80 for the average Arabian light spot prices and an 8.5 million bpd for average oil production in 2011, we project revenues and expenditures at SR753 billion and SR677 billion, respectively. This would lead in turn to a budget surplus of SR77 billion, or 4.2 per cent of estimated GDP in 2011," NCB said.
It expected actual expenditure to be overshot by around 17 per cent through the year as the government is pursuing post-crisis fiscal expansionary measures, which are aimed at supporting the economy.
But in another study, Banque Saudi Fransi said it expected overspending to be far high, putting it at about 45 per cent, following the announcement of a massive financial handout for citizens by King Abdullah over the past few weeks.
© Emirates 24|7 2011
