Saudi central bank reserves rise sharply on back of high oil prices

Business Tuesday 29/May/2018 13:20 PM
By: Times News Service
Saudi central bank reserves rise sharply on back of high oil prices

Riyadh: The Saudi Arabian central bank's foreign reserves rose last month at their fastest rate for four years, official data showed on Monday, revealing the extent to which a rebound in oil prices is strengthening the kingdom's finances.
Net foreign assets climbed by $13.3 billion month-on-month to $498.9 billion in April, their highest level in over a year.
The assets peaked at $737 billion in August 2014 before the government began drawing them down to cover a budget deficit caused by a plunge in oil prices, and to build up its main sovereign wealth fund in preparation for overseas investments.
Last month's sharp rise in the reserves suggested the government is no longer under major financial pressure, after the Brent oil price climbed to about $75 a barrel last month from around $50 in the middle of last year.
However, Riyadh is still running a sizeable budget deficit, which it can fund partly with domestic and international bond issues. Saudi Arabia issued $11 billion of international bonds in April.
Riyadh would need oil prices to average $85-$87 a barrel this year to balance its state budget, an International Monetary Fund official told Reuters this month.
The vast majority of the reserves are believed to be denominated in US dollars. The April data showed the central bank boosting its deposits with banks abroad by $8.6 billion and its investment in foreign securities by $3.7 billion.
The data also showed Saudi bank lending to the private sector rising from a year earlier in April, by 0.7 per cent, after falling for 13 straight months.
If it continues, the rebound in bank lending could indicate the beginning of a recovery in the economy, which has been slumping because of new taxes, fees and other government austerity measures designed to cut the budget deficit.