Saudi Arabia’s foreign reserves dropped to their lowest level in more than 13 years in April, which may be an indication that the country hasn’t yet topped up the central bank’s holdings with the $326 billion oil windfall it received last year.
According to the central bank’s monthly report released on Sunday, net foreign assets decreased to 1.538 trillion riyals ($410 billion) last month, down for a fifth month in the longest losing run since early 2019. Reserves have decreased by more than 44% from their August 2014 peak.
The world’s largest crude exporter has changed how it oversees its oil riches, which has resulted in the drawdown, which has reached roughly $42 billion since November.
Although authorities indicated a year ago that the kingdom wanted to hold on to the money and then subsequently determine how to divide it, better oil prices and output used to swiftly translate into rising foreign reserves. According to the Finance Ministry, there was a 103.9-billion-riyal surplus in the budget last year.
As stated by Finance Minister Mohammed Al-Jadaan, the administration has established the lower and upper bands for the level of reserves it wishes to keep as a percentage of economic production with the aim of defending the public finances against potential shocks.
The stockpiling is essential to preserving trust in Saudi Arabia’s peg to the dollar of 3.75. The 12-month forward outright rate for the riyal was unchanged on Friday at 3.7505, indicating that traders believe the peg to be firm.
The International Monetary Fund predicts that Saudi Arabia would have a budget deficit of 1.1% of GDP this year, which is contrary to the government’s projection of a second consecutive surplus of 16 billion riyals.
Early this month, Saudi Arabia reentered the debt market by offering $6 billion of Islamic bonds. In the first quarter of the year, the kingdom had already declared a deficit of 2.91 billion riyals.