Saudi remittances fall as expats invest domestically

Suvra Kanti Das/ABACA via Reuters Connect

• Saudi remittances down 13%
• Lowest since 2011
• Internal investment growing

Expatriate remittances from Saudi Arabia have fallen over the past two years, despite a rise in the number of overseas workers needed to develop the kingdom’s slate of huge giga-projects.

Some experts have predicted the slump in funds sent back home could be as a result of improved investment opportunities inside the kingdom. 

Yearly remittances fell by 7 percent to SAR143 billion ($38 billion) in 2022, according to central bank data, then fell a further 13 percent in 2023 to SAR125 billion, the lowest figure since 2011. This included a figure for December provided by business site Argaam that is not yet on the central bank website. 

Saudi Arabia has a foreign population of 13.4 million people, or 41.6 percent of a total population of just over 32 million, according to the last official census. 

Although the government has cracked down on illegal residency, the expat population has risen by 34.7 percent since 2010, in line with the Saudi population rise of 33.8 percent.

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The government is keen to attract foreign tourists and business as part of its mammoth development plans to diversify away from oil, increase employment among Saudis and integrate a once closed country with the global economy and culture. 

The Saudi government is trying to drive up annual foreign direct investment to $100 billion, from $33 billion in 2022. 

Companies can now set up within two months, as ease of doing business in Saudi Arabia has dramatically improved since 2018.

Regional companies are now required to open Saudi offices for access to any government contracts worth SAR1 million ($270,000) or more. A new commercial code was introduced in December to ease an opaque legal system. 

Expatriates have been major providers of foreign currency to countries such as Egypt and Pakistan, but Saudi Arabia’s changing economic profile, including financial sector reforms, are making it more attractive for residents to invest some of their earnings in the kingdom. 

Economist James Reeve of Jadwa Investment pointed to high interest on short-term savings products that are easily accessible through banking apps. 

“My guess is that expats who don’t urgently need to send money back to their mother country have been taking advantage of high savings rates on offer in the kingdom,” he said.