(Adds details of drawdown, analysis)

By Andrew Torchia

DUBAI, Oct 5 (Reuters) - Net foreign assets at Saudi Arabia's central bank fell by $6.6 billion in August as the kingdom liquidated assets to cover a budget gap caused by cheap oil, official data showed on Monday.

The central bank, which serves as the sovereign wealth fund of the world's top oil exporting country, has been drawing down its reserves since late last year as the plunge in global crude prices slashes its export revenues.

Its latest data showed foreign assets shrinking 1 percent from the previous month to 2.455 trillion riyals ($655 billion) in August, for a year-on-year decline of 11.2 percent. Assets hit a record high of $737 billion in August last year.

Saudi Arabia's assets, some of which are managed by global fund firms, are held mainly in the form of securities such as U.S. Treasury bonds and deposits with banks abroad. Equities are believed to account for only a small fraction of securities holdings, perhaps 20 percent. The vast bulk of assets are believed to be denominated in U.S. dollars.

The drop left assets at their lowest level since February 2013, but the pace of decline has slowed since early this year, when month-on-month falls sometimes exceeded 2 percent.

One reason for the slower fall is the government's decision to resume issuing sovereign bonds for the first time since 2007. Since July it has been issuing about 20 billion riyals each month, reducing the need to draw down foreign reserves.

State spending may also have slowed since early this year, when the government spent heavily on handouts to citizens to mark the accession of King Salman.

Last month, Finance Minister Ibrahim Alassaf said the authorities were cutting unnecessary expenses and delaying some projects to compensate for low oil prices. He didn't give specifics.

The slide in Saudi Arabia's foreign reserves may continue for years, London-based Capital Economics said in a report last week, though it predicted the pace would slow as Riyadh restrained spending and oil prices rebounded gradually.

"This shouldn't cause too much alarm - even at the current rate of depletion, FX reserves would last for at least another eight years," it said.

In June and July, the central bank sold securities heavily while increasing its deposits at foreign banks, its balance sheet shows.

But in August it reversed that pattern. Its foreign securities holdings actually rose, by $4.3 billion to $470 billion, while foreign bank deposits tumbled $10.3 billion to $121 billion, according to the latest data.

(Reporting by Andrew Torchia; Editing by Catherine Evans) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))