Jeddah, Asharq Al-Awsat—The recent record levels of reserve assets held by Saudi Arabia’s central bank are an indicator of the Kingdom’s economic stability and robustness in the face of major financial crises, economists have told Asharq Al-Awsat.
Reserve assets held by the central bank, known as the Saudi Arabian Monetary Agency (SAMA), jumped 39 billion Saudi riyals (10.4 billion US dollars) to reach 2.84 trillion riyals (757.3 billion dollars) in August, the highest level in the institution’s history and representing a 6.5 percent rise year-on-year, according to SAMA’s monthly report.
Economist Abdulaziz Al-Fahad told Asharq Al-Awsat any growth in SAMA’s reserves reflected general economic growth in the country, despite the predictions the the Kingdom would run a budget deficit by the end of the year.
Fahad pointed to the interconnected relationship between central bank reserves on the one side, and government income and that of several government institutions, as well as reserves held by domestic private merchant banks, on the other, indicating that the health of one side indicated the health of the other.
SAMA itself attributed the rise in reserves to investments it made outside the Kingdom, which jumped to 2.1 trillion riyals (560 billion dollars) in August, up from 1.9 trillion riyals (506 billion dollars) the same period the previous year, in addition to a year-on-year rise in its gold and foreign currency reserves from 202 billion riyals (54 billion dollars) to 219 billion riyals (58 billion dollars) during the same period.
Fahad said the growth also indicated the country’s financial depth, and pointed toward the Kingdom’s economic stability and its ability to ward off any potential financial crises that could occur.
Isam Khalifa, a member of the Saudi Economic Agency, told Asharq Al-Awsat the way SAMA had managed its reserves abroad reflected its “conservative” economic policy, and praised its efforts during the global financial crisis of 2007–2008, which ensured economic stability in the Kingdom during a turbulent period, he said.
In addition to government investments, SAMA’s reserve assets also include investments in foreign-based securities and foreign currency, as well as gold, foreign currency deposits, and special drawing rights with the IMF.