Thursday 31, May 2018 by William Mullally

Saudi Arabian FX reserves hit 14-month high

International reserves increased by $19.3 billion to $506 billion between April and May 2018.

The Saudi Arabian Monetary Authority (SAMA) has published a breakdown of foreign exchange reserves which reveals that the  harp increase in April was due to current account surpluses, owing to a rise in oil receipts, as well as foreign borrowing. The foreign borrowing has increased as of late, with a $10 billion syndicated loan was secured last year, and another $16 billion was secured this March.

International reserves increased by $19.3 billion to $506 billion between April and May 2018, according to SAMA. 

"We view that the inclusion of Saudi Arabia in the FTSE and MSCI EM indices, along with privatisation plans which are likely to come to fruition in 2019, will lead foreign exchange reserves to continue rising over the medium-term,” Ehsan Khoman, Head of Research and Strategist for MENA at MUFG. 

Experts from across the world have heralded the moves made by Saudi Arabia as of late, increasing optimism for the market nearly across the board.

“We look for Crown Prince Mohammad bin Salman (MbS) to push ahead with economic reform within the context of the Vision 2030 agenda. We continue to take comfort by the vigour surrounding the reform programme and see ongoing measures to relax the Kingdom’s social code as evidence of a broader liberalising agenda. We view the initiatives will lift economic growth over the medium term, but our expectations are tempered by the scale and complexity of the change that needs to be delivered. The reform demands will also test the authorities’ commitment, with planned cuts to subsidies and changes in the labour market, for example, likely to impose costs long before they generate returns. It is also critical that in their imperativeness to deliver change and maintain control, the authorities do not deepen the dominance of the state owned sector, but instead allow an independent private sector to emerge. All in all, the magnitude of meaningful structural change away from the reliance on hydrocarbons will depend on how quickly the Kingdom proves able to execute the key reforms that form the central part of policy discussions. The activities of the newly empowered PIF will be vital to this process, as will the readiness of the private sector to participate in the programme,’ said Khoman.



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