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Saudi forex reserves hit $510B in August as oil prices surge

Foreign reserves at Saudi Arabia's central bank have been increasing this year and a large proportion of recent capital outflows has been due to foreign investment by other Saudi institutions, a senior central bank official said on Sunday.
Brent oil has jumped near $80 a barrel from $67 at the end of 2017, swelling Saudi Arabia's current account surplus and shrinking its state budget deficit; this has reduced the need to liquidate assets to finance government spending.
However, the central bank's net foreign assets - a measure of the country's ability to defend its currency if needed - have risen only marginally, to $493.8 billion at the end of July from $488.9 billion at the end of 2017.
Data for August has not yet been published, but Ayman bin Mohammed Al Sayari, deputy governor for investment, said the foreign reserves increased last month. Using a slightly different definition which includes gold and special drawing rights, he said the reserves rose to $509-510 billion at the end of August from $502 billion in July. Sayari said Saudi institutional investors were coming to the central bank to exchange their local currency for hard currency that would be used to invest abroad.
This may explain the slow pace of increase in the central bank's foreign assets this year.
"A lot of the capital flows or at least a considerable portion of that...figure was merely some other institutional investors, quasi-sovereign, who have elected to...invest more internationally than locally," he told a news conference.
This pattern was seen in the first two quarters of the year, he said.
Sayari did not name the institutions, but many commercial bankers believe the Public Investment Fund, the kingdom's top sovereign wealth fund, is boosting its spending abroad.