Saudi comfortable with foreign reserves level: Central Bank
At the end of September, the reserves totaled $555 billion, a drop from about $616 billion at the end of 2015 and $732 billion a year earlier
Saudi Arabia has a “very comfortable” level of foreign reserves, the central bank chairman said on Monday, despite a drawdown in assets to help cover a fall in oil revenue.
At the end of September, the reserves totaled $555 billion, a drop from about $616 billion at the end of 2015 and $732 billion a year earlier.
“I think we are very comfortable. We have no issue with that,” Saudi Arabian Monetary Agency Governor Ahmed Alkholifey told a press conference after the release of SAMA’s annual economic report.
Since 2014, global oil prices have collapsed by more than half, accelerating Saudi efforts to move away from petroleum which still accounts for the bulk of government income.
The world’s biggest oil exporter, in its budget released last December, projected a deficit of $87 billion this year.
Alkholifey could not publicly comment on whether this year’s deficit is expected to approach that figure, although SAMA has confidential internal forecasts.
Its annual report said oil revenues fell 51 percent last year to $119 billion, or 72.5 percent of revenues, against 87.5 percent in 2014.
Non-oil proceeds rose to $45.2 billion, or 27.5 percent, up from 12.5 percent the previous year.
Expenditure was $260 billion, leaving a record deficit last year of $97 billion.
Faced with this shortfall, Riyadh took a series of austerity measures, including subsidy cuts, reductions in cabinet ministers’ salaries and delays in major projects.
Along with drawing on its reserves in an effort to cover its fiscal gap, the kingdom has issued domestic bonds and in October raised $17.5 billion from its first international bond issue.
Earlier this year, Deputy Crown Prince Mohammed bin Salman, 31, who heads the main economic coordinating body, announced a wide-ranging plan to move the economy away from oil.
Alkholifey said the Saudi economy grew by 3.5 percent in the first half of this year.
The International Monetary Fund projects Saudi real Gross Domestic Product growth of far less, at 1.2 percent this year, compared with 3.5 percent in 2015.
Saudi Arabia's central bank expects gross domestic product to grow 1.8 percent this year, faster than the 1.2 percent forecast by the International Monetary Fund, the bank said in its annual report, released on Monday.
The non-oil sector is expected to expand 2.5 percent and the oil sector, 1.2 percent, the central bank said.
Christine Lagarde, IMF Managing Director, during her visit to Riyadh late last month had discussed the economic outlook and policy priorities with Saudi Arabia and other GCC Countries.
Responding to low oil prices
“Saudi Arabia has begun a major policy shift to respond to low oil prices,” Lagarde had noted in her statement on October 26, 2016, in Riyadh. “Vision 2030 and the National Transformation Program (NTP) contain ambitious policy reforms to reduce the economy’s reliance on oil, strengthen non-oil growth, and increase employment opportunities. These reforms are very welcome. I look forward to the authorities laying out, prioritizing, and sequencing the policy measures to be implemented, with a view to reducing the risk of implementation bottlenecks and allowing businesses and individuals time to adjust.
“Fiscal adjustment has started, with the government containing expenditures and raising additional revenues. These efforts should continue over the medium-term including through further increases in energy prices which are still low by international standards, further revenue-raising measures including from the planned introduction of excises and the VAT at the GCC level, and further spending restraint,” she said.
Earlier, the IMF had said that non-oil growth numbers in the GCC were going to be substantially lower than they were in the five years leading up to 2015 - at 1.8 percent.
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