Saudi foreign reserves fall 5% as oil revenue drops

Reuters/Ahmed Yosri

• Total reserve assets now $437bn
• Oil revenues go into giga-projects
• GDP growth forecast lowered

Saudi Arabia’s international reserve assets fell 5 percent in value year on year in 2023, after oil output cuts that hit GDP had only limited success supporting prices. 

Central bank figures show total reserve assets were at SAR1.6 trillion ($437 billion), from  SAR1.7 trillion in January 2023, when the government was embarking on a policy of Opec+ output cuts to try to keep prices up as global demand weakened. 

Foreign currency reserves make up more than 90 percent of total assets, which also include foreign securities, the reserve position in the International Monetary Fund (IMF), special drawing rights, and monetary gold. 

• IMF predicts 2025 rebound for Saudi GDP

• Fitch affirms Saudi rating on its robust balance sheet

• Why the Saudis have to keep oil prices higher for longer

Saudi foreign reserves fell by around $16 billion in July last year, as the government appeared to funnel a greater share of oil revenues into the Public Investment Fund to pay for its massive economic development project. 

Saudi Arabia, the world’s top oil exporter, is trying to diversify its economy via massive development projects that have made the country one of the world’s largest construction sites. 

Last month the IMF lowered its forecast for Saudi Arabia’s increase in GDP in 2024 to 2.7 percent, down from a forecast of 4 percent made last October, on the grounds of lower oil production, which is due to continue until March. The government says GDP declined by around 1 percent in 2023. 

The kingdom’s finance minister, Mohammed Al-Jadaan, said in December that the timetables of some giga-projects would be slowed to avoid creating supply bottlenecks and inflation. 

The IMF has predicted average inflation of 2.2 percent in Saudi Arabia in 2024 and 2 percent in 2025. 

Saudi Arabia’s foreign reserves are seen as vital to maintaining confidence in the dollar peg. Reserves hit a high of $744 billion in 2014 but are now back down to 2010 levels. 

Fitch Ratings, affirming its A+ rating for Saudi Arabia this month, said: “We forecast reserves to decline to an average of $420 billion in 2024-2025, as the current account surplus narrows on the assumption of lower oil revenue.” 

However, Fitch said that Saudi Arabia had “one of the highest reserve coverage ratios among Fitch-rated sovereigns, at 16.5 months of current external payments.”