Cuts in Saudi foreign assets to slow down
riyadh — The drawdown of the Saudi Arabian central bank’s net foreign assets is likely to slow next year and in years to come, Finance Minister Mohammed Al Jadaan said on Tuesday.
He was speaking after releasing a 2018 state budget that includes a rise in spending to a record high, as the government slows its austerity drive in order to boost flagging economic growth.
The Saudi Arabian Monetary Authority’s (Sama) net foreign assets have shrunk to $485.9 billion in October this year from $737 billion in August 2014 as the government liquidates them to cover a budget deficit caused by low oil prices.
The 2018 budget plan includes only a modest decline in the deficit, to 195 billion riyals ($52 billion) from 230 billion riyals posted this year.
But Al Jadaan said: “I think the steps that have been taken for next year are likely to slow down the drawdown of Sama reserves, and it is likely to even get slower in the few years to come.”
The government may get windfall revenues from privatisation exercises next year. Also, private analysts calculate that the 2018 budget assumes an average Brent crude price of around $51 to $55 a barrel; Brent is now around $63, suggesting revenues may be larger than projected next year.
Al Jadaan said authorities were positive on oil prices in 2018, adding that oil revenues next year would also be boosted by a second round of domestic energy price reforms.
The first phase of the King Abdullah Financial District, the financial area under construction in Riyadh which has been plagued for years by delays and administrative problems, is set to open in the coming year and will be managed by the government’s Public Investment Fund (PIF), Al Jadaan said.
“This has already been agreed and work is underway already. There has been a lot of work within the government to ensure that it is now clean and ready to complete its construction,” he said.
“We will see more announcements from PIF on the details — what is the phasing, what are they planning — in weeks, not months and not years.”
On the planned sale of a stake in state oil giant Saudi Aramco next year, Al Jadaan said a listing of the shares in Riyadh only was “definitely an option”, but that other options, including an additional international listing, were still being reviewed.
Saudi Arabia’s economy minister said his country was studying the idea of creating a national privatisation fund to facilitate sales of state assets. “I think it is a valid concept,” Mohammed Al Tuwaijri said. Such a fund would bundle together state assets and be sold to Saudi citizens at a discount, letting them profit from privatisations.
However, Al Tuwaijri added that the idea would need many approvals to become reality. He said among all the state assets earmarked for sale, efforts to sell assets in the water and grains sectors had made the most progress.
“Water desalination is ahead of others. SAGO silos and grains are ahead of others. When I say that, they’ve appointed advisers, their requirements to the capital markets are almost there, the private sector appetite is secured,” he said.
“The question is timing — how will this fit with the other programmes and the privatisation programme itself.”
The government said earlier this year that it planned to raise about $200 billion through its privatisation programme in coming years, in addition to some $100 billion through the sale of a stake in Saudi Aramco in 2018.
Slowing energy reforms
Saudi Arabia is slowing plans to eliminate subsidies for a wide range of energy products — plans which are key to efforts to make the country use energy more efficiently — under a new long-term fiscal programme released with Tuesday’s budget. The new fiscal programme provides for domestic gasoline and diesel prices to be linked to international benchmark prices gradually between 2018 and 2025. Under the old programme, which was released last December, all energy products were to be linked to benchmarks by 2020. — Reuters