News / Business

Saudis not penniless yet but draining assets

Tuesday, 29 September 2015 9:26 AM [ Last Update: Wednesday, 30 September 2015 3:55 AM ]

Saudi Arabia’s foreign reserves have hit record lows.

Saudi Arabia has withdrawn as much as $70 billion of its assets held abroad as the kingdom’s lavish spending and its destructive war on Yemen is burning through reserves at a blistering pace.

According to financial services market intelligence company Insight Discovery, Saudi rulers are using the assets to plug the budget deficit which the International Monetary Fund predicts to exceed $107 billion this year.

The financial news and data provider Bloomberg, citing asset managers, said the Saudi Arabian Monetary Authority (SAMA) has pulled out between $50 billion to $70 billion of the funds held abroad over the past six months.

“Saudi Arabia is withdrawing funds because it’s trying to cut its widening deficit and it’s financing the war in Yemen," it quoted Nigel Sillitoe, CEO of the Dubai-based Insight Discovery, as saying.

The kingdom is facing a backlash from its move to flood the market with excess oil in order to drive down prices for political reasons.

Saudi Arabia’s foreign reserves have hit record lows from a peak of $737 billion in August 2014 and are falling by at least $12 billion a month at current levels.

"Foreign-exchange reserve depletion, rather than accumulation, is the new reality for Saudi Arabia. None of this should come as much surprise given the current-account deficit and risk of capital flight,” Bloomberg said.

Saudi Arabia faces a crisis after its misjudged gamble on oil.

Oil income accounts for about 80% of revenue in the country of about 30 million people.

With spending forecast to reach 1,082 billion riyals (more than $270 billion) this year, Saudi Arabia’s fiscal deficit could rise to around $140 billion or 20% of GDP, according to the IMF.

Saudi rulers have already borrowed $4 billion from local banks and plan to raise as much as $26 billion in bonds before the end of the year.

Standard and Poor’s cut its credit outlook for Saudi Arabia in February to negative from stable, saying it viewed the country’s economy “as undiversified and vulnerable to a steep and sustained decline in oil prices".

The kingdom’s finances are depleted at an alarming rate by continued subsidies, handouts to public sector workers in order to keep dissent in check, the Yemen war and a patronage system which has expanded over years.

Saudi Arabia is also engaged in a massive military buildup that will catapult the kingdom to the fifth place in the world ranking for military spending.

Press TV’s website can also be accessed at the following alternate addresses:

www.presstv.co.uk