According to the Central Bank, Saudi Arabia’s net foreign assets have hit their lowest levels since 2009.
The country’s central bank has revealed in its monthly report that Saudi Arabia’s foreign currency reserves dropped by more than $16 billion in July, marking the biggest decline since the aftermath of the 2020 COVID-19 pandemic.
Saudi-arabia’s-foreign-currency-reserves-plummet: After increasing in May and June, net foreign assets fell to $407 billion, the lowest level since 2009, as Riyadh cut oil production to stabilize prices.
Saudi Arabia is expected to have an average output of 9 million barrels per day (bpd) in July, August, and September, following a unilateral voluntary production cut of 1 million bpd in the country. This move was aimed at supporting oil market stability.
saudi-arabia’s-foreign-currency-reserves-plummet: Initially, the output cut announcement was made only for July, but it was later extended through August and September.
Monica Malik, Chief Economist at Abu Dhabi Commercial Bank, commented, “There should be an improvement in the status of net foreign assets in September, especially when the first performance-linked dividends arrive from the country’s oil giant, Saudi Aramco.” The company announced earlier this month its plan to start distributing dividends linked to performance from the third quarter of 2023.
In comparison to 2022, Saudi Arabia’s income has been impacted this year due to lower crude oil prices, with Riyadh earning nearly $326 billion, much lower than expected. Economists have warned that the revenue drop from reduced oil exports is also affecting the country’s budget and poses a risk of budget deficits.
Amidst the decline in oil export profits, there has been an increase in spending on diversification, resulting in a larger budget deficit for the world’s largest crude oil exporter, as revealed by data at the beginning of this month.