Saudi Reserves Down Again But Deficit Narrows

Saudi foreign exchange reserves fell to $570bn in June, down 22% from their peak level of $732bn at the end of 2014, as the kingdom continues to raid its savings to maintain investment in its oil and non-oil economies, along with the expense of military operations in neighboring Yemen and in Syria. The government is implementing spending cuts, but its budget still projects a staggering $87bn deficit this year, down from $98bn in 2015 (MEES, 20 May).

Reserves remained unchanged in May, but fell $11mn in June. This was the biggest monthly decline since January, despite Brent prices averaging $49.93/B, up 5% from May. With prices falling to $46.53 in July, and running around $44/B as MEES went to press further drawdowns look on the cards. With reserves down 15.6% on a year ago, continuation at this rate will see them fall to $523bn by the end of the year, and be exhausted in 2022 (see chart).


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