Saudi Arabia’s foreign reserves, a measure of the country’s ability to support its dollar-pegged currency, recently fell to new lows, owing in part to a lag between import payments and export earnings, told by the Saudi central bank governor Fahad al-Mubarak, according to Reuters.
Net foreign assets at the central bank, SAMA, fell by approximately $8 billion in April to $436 billion, the lowest level in more than a decade, and fell even more in May, to around $433 billion, according to the latest central bank statistics.
“Reductions in reserves over the past couple of months were mainly to finance a rebound in pandemic-hit import demand, while leads-and-lags in oil income (tax and dividends) cause some degree of fluctuation in SAMA’s reserves level,” told by the Saudi central bank governor.
Given the recent rise in oil prices, the losses were paradoxical, and several experts speculated that they may be connected to transfers to the Saudi sovereign wealth fund, Public Investment Fund, which received $40 billion in reserves last year to fund investments.
“The rebound in import activity, which hit a low figure in May 2020, has preceded that in exports receipts. These shifts are expected given the extraordinary economic impacts over the last 18 months as economic conditions become more normalized,” the governor told Reuters.
They’re comfortably over what Riyadh would need to keep the peg, at $433 billion, but falling oil prices have hurt the Saudi riyal in the forwards market in recent years, as speculators anticipate the Kingdom would be forced to devalue its currency.
According to the most current official trade data, Saudi imports totaled 49.1 billion riyals ($13.09 billion) in April. This is up 17.5% year-on-year and 33% over May of last year.