Saudi Arabia?s Foreign Assets take the High Road

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A fiscal surplus is expected to greet the Kingdom at the end of this year as its foreign assets sit at the highest place that they have ever been.

Saudi Arabia has experienced a surge in its crude oil output as well as strong oil prices. As a result, it foreign assets grew by more than SR40 billion in June, as per the July bulletin released by the Saudi Arabian Monetary Agency (SAMA).

Soaring above expectations

The end of June saw a rise in total foreign assets from SR1,856.2 billion ($495 billion) to an all time high of SR1,897 billion ($505.8 billion) at the end of June. Therefore, the country?s foreign assets experienced the biggest increase for a period of 6 months, in the first half of this year, swelling by SR192 billion.

This indicates that the country has earned more than it spent, and the fiscal deficit should shift to a surplus .

A breakdown showed SAMA?s deposits with banks abroad grew from SR360.1 billion at the end of May to SR372.5 billion at the end of June and its investment in foreign securities swelled to SR1,321.3 billion from SR1,293.8 billion.

For 2011, Saudi Arabia announced a record high budget of SR580 billion for 2011, with a deficit of SR40 billion has been announced by the country.

National Commercial Bank (NCB) is more even more confident. “We believe that revenues are underestimated, and the government will still manage to record a surplus in 2011.?

The bank went further to say that ,?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.?

Further advancements

Although “miscellaneous” assets slipped to SR23.3 billion from SR24 billion, foreign currencies and gold rose from SR154.5 billion to SR156.5 billion.

During the year of 2008, when oil prices climbed to their highest annual average of nearly $95 a barrel Saudi Arabia?s foreign assets recorded one of their largest increases of nearly SR513 billion. But this was followed by a ?sharp fall in crude prices depressed them by SR139 billion in 2009.

Two years down the line, the budget shot back into a surplus of SR109 billion after oil prices increased by at least $15 a barrel.

NCB?s Study

NCB also sent a study to Emirates 24/7 on Saudi?s financial situation. Figures showed the country?s monetary base and money supply surged by 15.7 and 13.1% t in the second quarter of 2011. However on a quarterly basis, a large decline of SR21.8 billion in deposits held by SAMA has led to the country?s monetary base receding by 3.7 % .

Claims on government and quasi-government soared by 26.5 per cent in the second quarter.

However, total deposits expanded by 11.8 percent this past quarter, in order to keep the loans-to-deposits ratio suppressed at 74.5 per cent. NCB said that Saudi banks have chosen to expand their loans portfolio and put idle liquidity to use, and its figures showing that claims on the private sector gained a moderate 7.8 per cent annually.

They had also partly shifted their international investments to the domestic market, with net foreign assets (NFA) declining by SR14.2 billion Q/Q in the second quarter to reach SR112.9 billion. But SAMA?s NFA is still on the rise and has come up to SR1.844 trillion.

In the first six months of 2011, crude prices averaged nearly $100 a barrel and could remain relatively high through 2011 and the oil price assumed by Riyadh of just under $60 will be far below the expected actual price by the end of the year. Analysts however believe that the shortfall is temporary.


Sources: Saudi Gazette, Middle East North Africa Financial Network, Emirates 24/7


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