Saudi Arabia’s Reserve Assets Rise By 4.5% to $459 Billion

The rise in reserves comes as Saudi Arabia navigates a shifting global economic landscape marked by fluctuating oil prices and increased project-driven imports.

The official reserve assets of Saudi Arabia increased by approximately 4.5% from the previous month to SR1.72 trillion ($459 billion) in May.

According to data from the Saudi Central Bank, generally known as the Saudi Arabian Monetary Authority (SAMA), the increase in foreign currency and deposits held abroad, which rose 15.5% from April to SR671.27 billion, the highest level in almost six years, was the main driver of the reserve gain.

The rise in reserves comes as Saudi Arabia navigates a shifting global economic landscape marked by fluctuating oil prices and increased project-driven imports.

Saudi Arabia’s economy is highly reliant on oil exports. There is a strong positive correlation between gross domestic product (GDP) growth and oil prices. If the oil prices are high, it increases government revenue and encourages investment.  

The fluctuations in oil prices are not merely statistical events. They are potent forces that reshape numerous aspects of the Kingdom’s economic structure. These price fluctuations affect everything from companies to government revenue and job creation. It also impacts the overall balance of international trade and residential energy bills. Thus, Saudi Arabia finds it crucial to diversify its economy so that it can rely less on oil.

As part of its Vision 2030 diversification push, the Kingdom has witnessed an increase in non-oil export activities and expanding tourism receipts, as long as oil revenue remains the core contributor of foreign inflows.

By doing this, the Kingdom can better manage risks brought on by fluctuations in oil prices and strengthen its long-term economic resilience, setting itself up for a more sustainable and balanced future.

These factors, along with careful financial account management, have ensured external balances and strengthened reserve accumulation, even as the current account surplus is decreasing.

According to SAMA data, reserves were still 2% lower than in the previous May, despite a significant monthly increase.

The central bank’s biggest reserve component is the investment in foreign securities. It fell by around 2% month over month to around SR955 billion.

Together, foreign securities and foreign currency deposits abroad accounted for about 94.5% of Saudi Arabia’s total reserve assets in May.  

It suggests that, despite a minor fall in long-term foreign securities, they deliberately allocated the reserves to more liquid foreign deposits. Shifting more funds into foreign banks’ deposits could improve liquidity and give the Kingdom faster access to reserves when needed.  

Other components include monetary gold, which remains unchanged at SR1.62 billion since 2008; Special Drawing Rights (SDRs), which stayed constant at SR80.16 billion; and Saudi Arabia’s reserve position at the International Monetary Fund (IMF), which is at SR12.65 billion.

The International Monetary Fund reserve shows the amount that the Kingdom can access on demand from the fund at any time, without any restrictions.

A Fitch Ratings study released in January stated that Saudi Arabia had significant foreign exchange reserves in 2024. Using its reserve, it can cover import and export payments for 14.4 months (or 1.5 years), which is above the average of around 2 months in countries with a similar credit rating.

Additionally, Saudi Arabia’s net foreign assets, calculated as total assets abroad minus external liabilities, stood at 63.7% of GDP, while the average for other A-rated countries was only 8.7%. It shows the Kingdom has a robust financial cushion.

Considering all, the rise in reserves to SR1.72 trillion, which is fuelled by calculated allocation of foreign deposits and maintained by careful reserve management, shows continued resilience and confidence in Saudi Arabia’s economic foundations. This upward trend also improves the Kingdom’s ability to handle external shocks, maintain current stability, and support long-term investment goals aligned with Vision 2030.