DUBAI - The foreign securities holdings of Saudi Arabia's central bank fell sharply in January in a sign that the government may be mobilising money for investment projects this year, official data showed on Wednesday.

After rising for three straight months, the bank's net foreign assets edged down to $486.7 billion last month from $488.9 billion in December. They shrank by 5.8 percent from a year earlier.

The government has been gradually liquidating the reserves, which peaked at $737 billion in August 2014, to cover a budget deficit caused by low oil export receipts. The vast majority of the assets are believed to be denominated in U.S. dollars.

But January's data showed a shift in the composition of the reserves. The portion held in the form of foreign securities, such as U.S. Treasuries, shrank by $5.4 billion to $326.5 billion, its lowest level for at least five years.

Meanwhile, the portion held in deposits at banks abroad actually rose, by $2.4 billion to $103.2 billion, the highest level in a year, giving Saudi Arabia flexibility to deploy the money quickly to spend on investment projects.

The government's economic plans for 2018 call for a 5.6 percent increase in central government spending over last year's actual level, plus additional off-budget spending by the Public Investment Fund, the main sovereign wealth fund, on real estate and industrial projects.

State spending will be key for the economy this year because of a sluggish private sector, which was hit last month by the imposition of a 5 percent value-added tax and a hike in domestic gasoline prices.

Wednesday's data showed outstanding bank loans to the private sector shrank 0.9 percent from a year earlier in January, the 11th straight month of falling bank lending.

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