Saudi lost $49bn of foreign reserves in 4 months due to low oil prices - Gulf Business
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Saudi lost $49bn of foreign reserves in 4 months due to low oil prices

Saudi lost $49bn of foreign reserves in 4 months due to low oil prices

The kingdom’s foreign reserves fell to $683 billion in April, from $732 billion at the end of 2014, a new report shows.

Saudi Arabia has lost about $49 billion of foreign reserves in the first four months of 2015 due to lower oil prices, a new report shows.

Investment firm Jadwa found that the kingdom’s foreign reserves fell by 6.6 per cent to reach $683 in April, from $732.4 billion at the end of 2014.

These reserves declined by $31 billion in the months of March and April alone, the report noted.

The world’s top oil exporter has piled up a comfortable bank of foreign reserves from years of high oil prices.

But the decline in the market over the last year has begun to impact the oil dependent economy’s spending power.

Jadwa’s report noted that Saudi Arabia’s current account surplus fell by 18.2 per cent between 2013 and 2014 to $81.2 billion. This is almost $25 billion lower than the Ministry of Finance’s announcement in December, the report said.

Foreign direct investment to the country also fell by $900 million year-on-year.

Another report from the International Monetary Fund released earlier today said that the Saudi economy will continue to expand this year on the back of strong state spending.

However, the fund predicted a less exuberant outlook for 2016, when it estimates the impact of low oil revenues will hit state spending.

The IMF also projected that the government would run a fiscal deficit of around 20 per cent of GDP in 2015 – much larger than the 14.2 per cent gap that it had forecast in May, and the biggest deficit since at least 1999.

Saudi Arabia, which has used oil revenues to foot its public spending, has been trying to reduce its reliance on hydrocarbon revenue through economic diversification, including encouraging more locals to enter the private sector.

This has proven challenging, however, due to a culture of cushy benefits in the public sector, low oil prices and the country’s increasing role in regional geopolitical conflicts.

In a major step to liberalise its economy, the Gulf Arab country is also set to open up its stock market to foreign investors on June 15. Experts are hoping this will lead to an inflow of funds, helping the country weather the period of low oil revenues.

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