Saudi Arabia transfers $40b from Sama’s forex reserves to PIF

Saudi Arabia transferred a total of 150 billion riyals ($40 billion) from the Saudi Arabian Monetary Authority’s (Sama’s) foreign exchange (forex) reserves to the Kingdom’s Public Investment Fund (PIF) in March and April, Finance Minister Mohammed Al-Jadaan said.

The government will continue to implement development plans to diversify the economy, increase local content and support private sector growth, Al-Jadaan, who is also acting minister of economy and planning, said in a statement released by the Saudi Press Agency (SPA).

This will happen either through the state’s general budget or through the role played by the development funds and the Public Investment Fund (PIF) to improve economic performance and enhance the return on the Kingdom’s assets, he added.

The transfer to the Public Investment Fund (PIF) was carried out after an in-depth consultation and in consideration of the adequacy of foreign exchange reserves, Al-Jadaan said.

Decisions to gradually reopen economic activities represent a new stage in the face of the coronavirus pandemic and toward a gradual return to normal economic activity, he added.

Al-Jadaan said the government had increased - during the last period through the budget - spending on urgent and necessary requirements to face the coronavirus crisis, and in doing so had significantly strengthened the financial allocations for the health and related services sector.

The decision to restart some sectors had been made with the advice of health professionals and guidelines at every stage of the plan to resume economic activities, he added.

The return of activities to their previous levels largely depends on the level of commitment by all, Al-Jadaan said, adding that the move is in line with economies reopening worldwide.

Finance Minister Mohammed al-Jadaan said in a statement that the transfers to Public Investment Fund (PIF) were done on an “exceptional basis.”

Saudi Arabia’s central bank foreign reserves fell in March by nearly $27 billion month-on-month, their fastest rate in at least 20 years, to around $464.5 billion, according to the calculations based on central bank data. April figures are not yet available.

Saudi Arabia’s foreign reserves are expected to drop in April at about the same rate as in March, as the government transferred $25 billion to the kingdom’s sovereign wealth fund, Public Investment Fund (PIF), to finance overseas investments, a finance ministry official told Reuters.

The statement did not give a breakdown but a finance ministry official told Reuters that the government transferred $15 billion to the Public Investment Fund in March and another $25 billion in April, saying foreign reserves are expected to drop in April at about the same rate as the previous month.

The official said the Public Investment Fund (PIF) had also converted into US dollars part of its own riyal-denominated liquidity to back investments. The government did not expect a significant drop in central bank foreign reserves going forward and fluctuations will be in line with previous years, added the official, who asked not to be named because the details are not yet public.

“While foreign exchange flows since the start of the year are on average within historical levels, this measure (transfers to PIF) resulted in a reduction in net foreign reserves assets to support investment plans,” Jadaan said in the statement, adding that PIF investments would not be reflected in published central bank data.

“Maximising returns on the kingdom’s assets will reflect positively on economic performance and public finances and limit negative effects of the coronavirus pandemic. Returns on PIF investments will be available to support public finances when needed,” he said.

In April, the head of PIF, Yasir al-Rumayyan, said it was looking in to investment opportunities in areas such as aviation, oil and gas and entertainment.

The fund, which manages over $300 billion in assets and has stakes in Uber Technologies Inc and electric car company Lucid Motors, had this year accumulated stakes in four major European oil companies and disclosed an 8.2 per cent stake in cruise operator Carnival Corp.

Earlier this month, it also disclosed stakes in Boeing Co, Citigroup Inc, Facebook Inc, Walt Disney Co and Marriott.

Jadaan also said in the statement that the government would continue to implement development plans to diversify the economy, increase local content and support private sector growth, whether through the general budget or through PIF and development funds.

The finance ministry official said PIF is still going ahead with investments in domestic mega-projects under Crown Prince Mohammed Bin Salman’s diversification drive, including the $500 billion NEOM economic zone, the Red Sea tourism project, and Qiddiya, an entertainment development that will include a Six Flags theme park.

He said the fund has significant liquidity in riyals from its own portfolio and from proceeds from last December’s initial public offering of state oil giant Saudi Aramco.

Agencies