Saudi Arabia's foreign assets could increase more than twofold to nearly $878 billion (SR3.22 trillion) at the end of 2010 because of massive fiscal surpluses spawned by a surge in its petrodollar income, according to a Saudi bank. The assets controlled by the Saudi Arabian Monetary Agency (SAMA), the Kingdom's central bank, peaked at an all time high of about SR1.62 trillion ($432 billion) at the end of august, a staggering increase of SR424b billion from their level of SR1.196 trillion at the end of 2007. They were also nearly double their level of SR884 billion at the end of 2006 and eight times the 2002 assets of almost SR197 billion. In August alone, the assets gained around SAR60 billion, an average SR2 billion a day, which indicated a steep rise in the Kingdom's budget surplus. Projections by the International Monetary Fund (IMF) showed the sharp growth in the country's fiscal surpluses would largely boost SAMA's foreign assets by the end of this year while the Saudi American Bank (Samba) expects the investments to be more than double by the end of 2010. “The Kingdom's main financial balances retain a solid outlook. On average, the current account should post surpluses of 34 percent of gross domestic product (GDP) in 2008-2010, while the fiscal surplus should remain around 20 percent of GDP, albeit moderating,” Samba said in its latest bulletin. “This will allow further substantial additions to foreign assets, which are already in excess of $400 billion, or 80 percent of GDP. We expect the official foreign assets to escalate to nearly $670 billion (125 percent of GDP) by the end of 2009 and to $878 billion or 143 percent of GDP by end-2010.” The budget surplus hit a record SR280 billion in 2006 compared to SR217 billion in 2005. It was estimated at SR176 billion in 2007 and is projected to jump to SR560 billion in 2008. “Considering the expected rapid climb in the country's oil revenue and production this year, SAMA's foreign assets will continue to rise through 2008.” said the National Commercial Bank (NCB), Saudi Arabia's largest bank in terms of assets. SAMA's figures showed that bulk of the increases in its asset this year was investment in foreign securities, which surged to SR1.13 trillion at the end of July from SR806.7 trillion at the beginning of 2008. In contrast, SAMA cut its deposits with banks abroad to SR276.1 billion from about SR298.6 billion in the same period. Analysts said the reduction was in line with SAMA's policy of diversifying its investments and seeking higher return on its assets following a series of interest rate cuts by the US Federal Reserve over the past year. They noted deposits had steadily fluctuated in the previous years, jumping to about SR246 billion at the end of 2007 from SR87 billion in July 2007. They stood at about SR123 billion at the end of 2006 and were as low as SR40 billion at the end of 2002, the figures showed. Besides record oil process this year, Saudi Arabia's crude production is expected to be sharply higher than the average 8.5 million barrels per day in 2007. According to NCB, output could be close to 9.3 million bpd in 2008 and the price of Saudi Arabia's crude could be as high as $100 a barrel. In the first five months of this year, the Kingdom, the world's oil powerhouse, pumped about 9.15 million bpd while its crude prices averaged $101.3. Apart from rebuilding its foreign assets, Saudi Arabia has used its oil windfall over the past few years to slash its public debt that surpassed its gross domestic product in late 1990s. By the end of 2007, the debt was as low as SR267 billion, nearly 19 percent of the 2007 GDP. It is expected to fall to 12-14 percent by the end of this year, according to Saudi and IMF forecast. __
