SR 2.49 trillion: SAMA windfall



JEDDAH: KHALIL HANWARE

Published — Wednesday 27 February 2013

Last update 1 March 2013 4:28 pm

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Saudi Arabian Monetary Agency (SAMA) announced yesterday its total assets reached SR 2.49 trillion in January 2013, SR 13 billion more than that of December 2012, reflecting the strength and growth of Saudi economy.
According to the central bank’s monthly bulletin, there was a 19 percent growth in SAMA’s assets in January this year and an increase of SR 406 billion compared to its financial position in January 2012.
Commenting on the SAMA’s report, Fahad Alturki, senior economist at Jadwa Investment, said: “The accumulation of foreign assets, which is supported by oil production and oil prices, represent an important cushion for the government’s expansionary fiscal policy.”
Alturki added: “This will give the government the ability to smooth spending in the face of volatile oil market.”
SAMA’s investment in shares and bonds outside the Kingdom accounted for 70 percent of its total assets and valued at SR 1.7 trillion by December 2012, registering a growth of 21 percent compared to 2011.
However, Said Al-Shaikh, senior vice president and group chief economist of the National Commercial Bank, said: “This is largely influenced by government deposits with SAMA.” He said the increase in deposits was because of “large export earnings due to high oil prices and production.”
Basil Al-Ghalayini, CEO OF BMG Financial Group, said: “In addition to its main mandate to regulate banks, insurance companies and mortgage finance firms, SAMA also manages its liquid assets applying international guidelines for its optimum assets allocation model. This positive performance over the previous period is a reflection of SAMA’s sound investment strategies for its international portfolio. The Saudi economy is big enough to absorb more than one Sovereign Wealth Fund other than Sanabil Al Saudia. Hence, SAMA may play a catalyst role in creating another fund.”
Fawaz Alfawaz, a Riyadh-based economic consultant, told Arab News: “As Saudi Arabia manages to accumulate reserves the confidence in its ability to continue the vast programs to modernize its infrastructure increases.”
However, he said it is important to draw distinction between the financial and capital account positions and the economic activities .These are more than sufficiently financed by the current budget outlays.
“The reserves would serve the country well in case of significant shortfall as happened in the 1980s. The reserves also help Saudi Arabia to maintain a comfortable ratings which help boost confidence and make easier for others to do business with the Kingdom.”
Referring to the performance of the Saudi banking sector, the SAMA bulletin said there was a six percent fall in its total profits valued at SR 3.26 billion in January 2013, compared to the same month in 2012 when the profit had reached SR 3.46 billion.
The balance sheet of SAMA continued to show expansion primarily on account of significant oil revenues and public spending in recent years. According to SAMA’s 48th annual report released on Monday, total assets and liabilities increased by 20.7 percent (SR 352.5 billion) to SR 2.0 trillion in 2011 compared to an increase of 8.6 percent (SR 134.7 billion) in 2010. Government deposits rose by 19.4 percent (SR 195.2 billion) to SR 1.2 trillion in 2011 compared to a rise of 8 percent (SR 74.3 billion) in 2010. Commercial banks’ deposits with SAMA climbed up by 15.5 percent to SR 63.5 billion in 2011 from SR 55.0 billion in 2010.
SAMA ‘s foreign asset base underwent a significant expansion owing to oil-related foreign exchange inflows accrued to the Saudi government in recent years. Therefore, SAMA’s deposits with banks operating outside the Saudi territory increased by 20.4 percent in 2011 to SR 414.0 billion from SR 343.9 billion in 2010. SAMA’s investment in foreign securities also increased considerably by 20.8 percent to SR 1.4 trillion in 2011 compared with a rise of 10.3 percent in 2010. Currency cover rose by 24.3 percent to SR 169.0 billion in 2011 compared to a rise of 10.5 percent in 2010.
The Saudi economy continued its strong growth in 2011 driven by several positive developments at the domestic and global levels.
At the domestic level, the government continued its efforts to make structural and regulatory reforms aimed at achieving sustainable economic growth through diversifying the economic base, promoting the contribution of the nonoil sector to GDP, increasing job opportunities for Saudis and reducing unemployment and inflation rates.
According to the Ministry of Petroleum and Mineral Resources, the average price of Arabian Light increased by 38.7 percent to $ 107.8 per barrel from $ 77.75 per barrel in 2010. In addition, the Kingdom’s daily average oil production rose by 14 percent to 9.3 million barrels in 2011 compared to 8.2 million barrels in 2010. These positive developments were reflected on the Saudi economy’s major indicators. Saudi Arabia’s GDP at current prices recorded a rise of 31.0 percent to SR 2.24 trillion in 2011 from SR 1.7 trillion in 2010. GDP at constant prices (base year 1999) grew by 7.0 percent to SR 941.8 billion from SR 879.8 billion in 2010.
Monetary survey continued to show sustained expansion in the assets and liabilities of the entire Saudi banking system since 2009. They rose by 17.1 percent (SR 468.3 billion) to SR 3.2 trillion in 2011 compared to a rise of 7.5 percent (SR 192.2 billion) in 2010.
The net foreign assets of the banking system shot up by 22.3 percent (SR 390.4 billion) to SR 2.1 trillion in 2011 against a rise of 7.3 percent (SR 118.7 billion) in 2010. SAMA held up a major chunk of foreign assets as it accounted for 93.8 percent of the net foreign assets of the entire banking system in 2011 against 94.4 percent in 2010.

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