The recent drop in Saudi Arabia’s net foreign assets has raised concerns about the country’s economic stability. According to the central bank’s monthly report, foreign reserves fell to their lowest level since July 2010, standing at 1.572 trillion riyals ($419 billion) in March, down from 1.625 trillion riyals the previous month. This is despite the fact that oil giant Aramco increased its dividend in the same month, providing a crucial source of funding for the Saudi Arabian government.
The drop in foreign reserves is seen as an indication that the government had heightened expenditure needs during the month. This is further supported by the fact that government deposits at the Saudi Arabian Monetary Authority (SAMA) also fell during the same period. Mohamed Abu Basha, head of macroeconomic research at Cairo-based investment bank EFG Hermes, has suggested that the government’s heightened expenditure needs could be the reason for the drop in foreign reserves.
Aramco, which realized net income of $161 billion for the full year, the most since it listed and up 46% from 2021, increased its dividend by 4% to $19.5 billion for the final quarter. This will provide much-needed funding for the government. However, despite the windfall generated by Aramco’s profits, Saudi Arabia’s economic growth is expected to slow down to 3.1% this year and next, according to the International Monetary Fund. This is a sharp drop from almost 9% in 2022, when Saudi Arabia’s economy was the fastest growing in the Group of 20.
The drop in foreign reserves is a cause for concern, as it could lead to a decrease in confidence in the country’s economy. It is important for Saudi Arabia to continue to diversify its economy and reduce its reliance on oil exports. This will require a significant amount of investment in sectors such as tourism, technology, and renewable energy. In addition, the government will need to continue to make efforts to reduce its expenditure, in order to maintain its economic stability.
Overall, while the recent drop in foreign reserves is a cause for concern, Saudi Arabia has the potential to continue to grow and diversify its economy. It will require significant investment and continued efforts to reduce expenditure, but with the right policies and investments, Saudi Arabia can maintain its economic stability and continue to grow in the years to come.
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