beyondbrics

The foreign assets of Saudi Arabia’s central bank have crossed $500bn for the first time.

Measured on a per capita basis or as a percentage of gross domestic product the kingdom’s foreign asset holdings are substantially higher than China’s, according to research from HSBC in Dubai.

Of that vast wealth around $360bn are holdings in foreign securities, the majority of which, analysts say, are US treasury bills. The central bank doesn’t give a full break down of its holdings and doesn’t say whether its data is mark-to-market.

But guess who has been radio silent on the US downgrade? Saudi Arabia. Not a squeak from the world’s largest oil exporter that may have the most at stake in the Middle East region.

“The Saudis tend not to say anything if their policy is not changed,” Paul Gamble a Riyadh-based economist at Jadwa Investment told beyondbrics. “I’m sure they are monitoring the situation closely, but in terms of size, liquidity and depth, there isn’t an alternative to US Treasuries.”

China as everyone knows made very public comments while the region’s dollar-pegged economies including Bahrain and the United Arab Emirates came out with statements.

Saudi Arabia’s foreign assets rose in July despite the country’s announcement of vast domestic spending plans. The government usually draws down on foreign assets when the government hikes spending.

It looks like higher oil revenues from increased production are now feeding the kingdom’s coffers.

“I don’t think the continued strong growth in foreign assets reflects lower spending, rather it is the result of very high oil revenues,” says Mr Gamble. “In recent months production has jumped.”

Oil production in Saudi Arabia increased to 9.8m barrels per day in June, up almost 1m barrels per day in May, according to Jadwa.

Related reading:
Saudi banks end private lending aversion, FT
Gulf’s wealthy move more capital offshore, FT
China urges US to ‘live within its means’, FT
Gulf petrodollars stay home for once, beyondbrics