Saudi finance minister says drawdown of foreign assets to slow further

Saudi finance minister says drawdown of foreign assets to slow further
Mohammed Al-Jadaan, Saudi Minister of Finance, gestures during a news conference announcing the 2018 state budget, in Riyadh, Saudi Arabia December 19, 2017. REUTERS/Faisal Al Nasser
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By Katie Paul and Rania El Gamal

RIYADH (Reuters) – The drawdown of the Saudi Arabian central bank’s net foreign assets is likely to slow next year and in years to come, Finance Minister Mohammed al-Jadaan said on Tuesday.

He was speaking in an interview after releasing a 2018 state budget that includes a rise in spending to a record high, as the government slows its austerity drive in order to boost flagging economic growth.

The Saudi Arabian Monetary Authority’s net foreign assets have shrunk to $485.9 billion in October this year from $737 billion in August 2014 as the government liquidates them to cover a budget deficit caused by low oil prices.

The 2018 budget plan includes only a modest decline in the deficit, to 195 billion riyals ($52 billion) from 230 billion riyals posted this year.

But Jadaan said: “I think the steps that have been taken for next year are likely to slow down the drawdown of SAMA reserves, and it is likely to even get slower in the few years to come.”

He did not elaborate, but the government may get windfall revenues from privatisation exercises and a crackdown on corruption next year. Also, private analysts calculate that the 2018 budget assumes an average Brent crude price of around $51 to $55 a barrel; Brent is now around $63, suggesting revenues may be larger than projected next year.

Jadaan said authorities were positive on oil prices in 2018, adding that oil revenues next year would also be boosted by a second round of domestic energy price reforms.

The first phase of the King Abdullah Financial District, the glitzy financial area under construction in Riyadh which has been plagued for years by delays and administrative problems, is set to open in the coming year and will be managed by the government’s Public Investment Fund, Jadaan said.

“This has already been agreed and work is underway already. There has been a lot of work within the government to ensure that it is now clean and ready to complete its construction,” he said.

“We will see more announcements from PIF on the details – what is the phasing, what are they planning – in weeks, not months and not years.”

On the planned sale of a stake in state oil giant Saudi Aramco next year, Jadaan said a listing of the shares in Riyadh only was “definitely an option”, but that other options, including an additional international listing, were still being reviewed.

“It’s premature to go into specific details on how the IPO is going to be structured.”

(Writing by Andrew Torchia)

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