By Staff writer
Price of oil and costly military campaign in Yemen has led to a decline in the country’s reserves
Saudi Arabia has withdrawn over $70 billion from global asset managers in the last year, as it looks to cut the growing deficit caused by falling oil prices.
The Financial Times reported that the foreign reserves of the kingdom’s central bank, Saudi Arabian Monetary Agency’s (Sama), have fallen by $71 billion, which amounts to almost all of the $72.8 billion decline in the country’s overseas assets.
The price of oil has roughly halved to close to $50 a barrel in the last year and the kingdom’s revenues from its crude sales make up 90 percent of its budget.
More recently, the war in Yemen has meant the country has had to fund an extensive and costly military campaign.
The speed in the decline of Saudi’s foreign reserves slowed in July after the government began issuing domestic debt to cover part of its budget deficit, but this month saw global asset managers hit by a series of redemptions, which followed on an initial wave of withdrawals earlier this year.
“It was our Black Monday,” one fund manager, told the newspaper, in reference to the large number of assets withdrawn last week.
“The big question is when will they come back, because managers have been really quite reliant on Sama for business in recent years,” said Nigel Sillitoe, chief executive of financial services market intelligence company Insight Discovery.
Sillitoe said fund managers estimated that Sama has withdrawn $50 billion - $70 billion over the past six months.
“We are not that surprised,” said another fund manager. “Sama has been on high risk for a while and we were prepared for this.”
The answer is pretty simple. Stop pumping oil at record volumes. Cut oil production and start making money again. There...I just saved Saudi Arabia 70bn next year.
The prices must stay low.