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Saudi forex reserves at 18-month high in boost to giga-projects

Saudi forex Aramco
Bumper dividends from Aramco could also account for the rise in reserves
  • Up almost 7% to $445bn
  • More investment for giga-projects
  • IMF says reserves will remain ‘ample’

Saudi Arabia’s foreign exchange reserves have shot up by nearly 7 percent this year to $445 billion in May, or SAR167 trillion, the highest since November 2022. 

The rise gives the government more scope to pump money into cash-constrained giga-projects

Saudi Arabia has raised $17 billion in debt markets this year. The Public Investment Fund has realised at least $15 billion in cash by divesting US equities. And the government has doubled PIF’s stake in Aramco to 16 percent, making it a recipient of the state oil company’s dividends. 



Reserves have fallen from a high of almost $740 billion in 2014, according to data from the Saudi central bank Sama. 

They dipped further last year, which analysts attributed to the government funnelling cash to the PIF for the massive economic reform projects. 

The projects are facing delays as oil prices fail to reach budget breakeven levels and foreign investment falls short of expectations, causing the government to look around for alternative funding sources. 

Chiro Ghosh, vice president of financial institutions at Sico Bank in Bahrain, said reserves had risen mainly because of higher oil prices in recent months. 

He said this was on the back of regional geopolitical tensions, as well as the debt issuances and PIF sale of US stocks.  

“All together these contributed to the rise in foreign exchange,” Ghosh said, noting the forex number has risen 6.6 percent so far this year.  

Bumper dividends from Aramco could also account for the rise in reserves. 

As 82 percent owner of the energy major, the government received most of the $31 billion dividend Aramco paid in the first quarter. 

That stake slipped to 81.5 percent after a recent secondary offering. But Sama’s forex reserves nonetheless shot up by $21 billion from April to May. 

PIF also benefits directly from Aramco as the owner of 16 percent of its equity. 

Saudi investment strategy has become more focused on PIF as a strategically aggressive sovereign wealth fund, whose assets under management were $925 billion in June, while the central bank has lowered its US treasury holdings

In its latest Saudi Arabia report, the International Monetary Fund said Saudi forex reserves will remain “ample”, averaging 13 months import cover.

“Foreign assets held by the PIF and other government-related entities offer strong additional buffers,” it said. 

The IMF also praised the government’s recent recalibration of the giga-projects but called for more transparency. 

“Making public the main implications of this exercise – particularly on spending and sectoral priorities up to 2030 – will be important to help provide clarity on government priorities to investors and the public,” the IMF report said.

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