Saudi Arabia has withdrawn $70 billion from global asset managers as Opec’s largest oil producer seeks to plug its budget deficit, according to financial services market intelligence company Insight Discovery.
“Fund managers we’ve spoken to estimate Sama has pulled out between $50 billion to $70 billion from global asset managers over the past six months,” Nigel Sillitoe, chief executive officer (CEO) of the Dubai-based firm, said on Monday. “Saudi Arabia is withdrawing funds because it’s trying to cut its widening deficit,” he said.
Saudi Arabia is seeking to halt the erosion of its finances after oil prices halved in the past year. The Saudi Arabian Monetary Authority’s (Sama) reserves held in foreign securities have fallen about 10 per cent from a peak of $737 billion in August 2014, to $661 billion in July, according to central bank data. The government is accelerating bond sales to help sustain spending.
“Foreign-exchange reserve depletion, rather than accumulation, is the new reality for Saudi Arabia,” Jason Tuvey, Middle East economist at Capital Economics, said on Monday. “None of this should come as much surprise,” given the current-account deficit and risk of capital flight, he said.
With income from oil accounting for about 80 per cent of revenue, Saudi Arabia’s budget deficit may widen to 20 per cent of gross domestic product this year, according to the International Monetary Fund (IMF). Sama plans to raise between 90 billion riyals ($24 billion) and 100 billion riyals in bonds before the end of the year as it seeks to diversify its $752 billion economy, people familiar with the matter said in August.
Full article: Saudi Arabia withdraws $70b from global funds (GEAB)