Imports rebound behind decline in Saudi reserves, says chief


Saudi Monetary Agency Governor Fahad al-Mubarak attends the 58th Annual Meeting of Central Bank Governors of the Gulf Cooperation Council (GCC) in Manama, September 18, 2013. REUTERS / Hamad I Mohammed

DUBAI, July 4 (Reuters) – Saudi Arabia’s recent drop to record levels in foreign exchange reserves, a measure of its ability to support its dollar-pegged currency, was in part due to a mismatch between payments to import and export earnings, the Saudi central bank governor told Reuters.

The net foreign assets of the central bank, known as SAMA, fell from around $ 8 billion monthly to $ 436 billion in April, their lowest level in more than a decade, and have fallen further in May, according to recent central bank data, to reach about $ 433 billion.

“The reductions in reserves over the past two months were mainly aimed at financing a rebound in import demand affected by the pandemic, while advances and delays in oil revenues (taxes and dividends) are causing some fluctuation in the level of imports. SAMA reserves, ”Fahad said. al-Mubarak, the governor of the central bank.

The declines seemed counterintuitive given the recent rebound in oil prices, and some analysts said they could be linked to transfers to the Saudi sovereign wealth fund, Public Investment Fund, which last year raised $ 40 billion. reserves to finance investments.

The rebound in import activity, which hit a low figure in May 2020, preceded that in export earnings. These changes are expected given the extraordinary economic impacts over the past 18 months as conditions economic return to normal, ”the governor said in a statement. statement to Reuters.

The central bank does not normally disclose the reasons for changes in net foreign assets.

At $ 433 billion, they are comfortably above what Riyadh would need to protect the anchor, but episodes of falling oil prices in recent years have hit the Saudi rial in the futures market, the investors betting that the kingdom could eventually be pushed to devalue its currency.

The value of Saudi imports in April was 49.1 billion riyals ($ 13.09 billion), according to the latest official trade figures. This is up 17.5% year on year and 33% compared to May of last year.

Exports grew 87% annually in April, with the value of oil exports increasing 109% year-on-year. Read more

“The relatively limited productive base means that a recovery in domestic demand due to the easing of restrictions related to COVID-19 is largely met by imports,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“However, the sharp rise in oil prices is boosting exports, which we believe will outpace import growth in 2021,” she said.

($ 1 = 3.7504 riyals)

Reporting by Davide Barbuscia; Editing by Alex Richardson

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