Saudi July net foreign assets fall as central bank invests in foreign securities

Saudi central bank reduced the amount of money it holds in low-yield banks deposits abroad in July as it increased its holding of more high-yield investments in foreign securities.

Data from the Saudi Central Bank (SAMA) published late on Sunday showed that the bank’s net foreign assets, which measures its ability to support its dollar peg to the riyal, fell marginally by 1 percent to SR1.64 trillion in July from the month before, stabilizing at a level comfortable enough to defend its currency peg.

At the same time SAMA increased the amount of money it invested in foreign securities by SR5 billion to SR1.130 trillion in July, the highest monthly figure since April. The move raised the total assets of SAMA in July 2021 for the second month in a row, to 1.85 trillion riyals, an increase of 6.4 billion riyals from June 2021, SAMA said in its monthly report.

“This is to be expected whereby SAMA is shifting part of its low-yield assets to high-yield investments as they want to maximize return on their overall asset portfolio,” London-based independent economist Mohamed Ramady told Arab News.

Commercial banks’ July total assets grew by SR4.6 billion during the month to SR3.12 trillion, the highest since 2016 as they moved money from foreign assets in domestic private and government lending, according to SAMA data.

“Moving funds to domestic investment is a sign of confidence in the economic recovery of the Kingdom, with more lending to the real estate sector, which rose by 6 percent on quarterly basis,” Ramady added.