Saudi forex reserves rising, capital outflows due to investment: SAMA

Foreign reserves at the Saudi Arabian Monetary Authority (SAMA) have been increasing this year, and much of the recent capital outflows have been due to foreign investment by the Kingdom’s other institutions, Reuters reported, citing an official at the central bank.

SAMA’s net foreign assets rose only marginally to $493.8 billion, from $488.9 billion at the end of 2017. This was despite oil prices jumping to nearly $80 a barrel, which would have increased the current account surplus and decreased the state budget deficit, reducing the need to liquidate assets to finance government spending.

However, the central bank’s foreign reserves increased in August, said Ayman bin Mohammed al-Sayari, deputy governor for investment at SAMA.

Using a slightly different definition which includes gold and special drawing rights, Al-Sayari said the reserves rose to $509-510 billion at the end of August from $502 billion in July.

Saudi institutional investors have been exchanging local currency at SAMA for hard currency that would be used to invest abroad, which could explain the slow pace of increase in foreign assets this year, he added.

“A lot of the capital flows or at least a considerable portion of that...figure was merely some other institutional investors, quasi-sovereign, who have elected to...invest more internationally than locally," he told a news conference.

This pattern was seen in the first two quarters of the year, he said.

The official noted that Saudi authorities are not imposing capital controls to curb outflows of funds.

“There's no capital flow constraints or restrictions in the kingdom...Investors are of course free to express their views on markets whenever they see opportunities, local or international.”