JEDDAH: Finance Minister Ibrahim Al-Assaf has said Saudi Arabia’s financial position remains strong despite sharp drop in oil prices.
In speech during a financial stability seminar organized by the Saudi Arabian Monetary Agency and the Capital Market Authority on Tuesday in Riyadh, Al-Assaf said the Kingdom “is facing the domestic, economic, financial and global current challenges while enjoying a position of strength, whether at the financial or cash levels.”
"It has been more than two years since the sharp drop in oil prices — the main source of income for finance of the kingdom and the important component of its national economy — but despite that and with God's guidance, we have been able to maintain a good position in public finances, as we have been able to maintain the stability of government reserves as they are still high.
“The level of debt remains low. Our banks are still enjoying strong balance sheets and indicators of solid financial safety and will continue to do so, God willing,” he said.
Al-Assaf’s speech was reported by the Saudi Press Agency (SPA).
“The financial institutions maintain their flexibility, as our banks enjoy relatively high levels of capital adequacy and liquidity ratios, despite some pressure on liquidity at the system level in general,” he said.
Notwithstanding the Kingdom’s position of strength, Al-Assaf stressed the need “to periodically review our policies relating to financial stability and modernize the inefficient ones and action will enable us to adapt to the current domestic and global challenges.
“Indeed, several government agencies have taken several actions, including actions in the context of the tasks entrusted to them and their roles in achieving the 2030 vision and program of national transformation. These actions succeeded in reducing the pressure, which hampers economic growth,” he added.
The kingdom projects a budget deficit of $87 billion this year as a result of the fall in oil revenues, which still account for most of its income.
Among measures to cover the fiscal gap, Riyadh has drawn on its foreign reserves, issued domestic bonds and last week raised $17.5 billion in its first international bond offering.
Saudi banks’ loan-to-deposit ratio rose for the fifth consecutive month in August, reaching 90.8 percent, because of faster growth in credit relative to deposits, Riyadh’s Jadwa Investment said in a report this month.
Borrowing abroad also reduces the drain on the kingdom’s foreign reserves.
Official figures show those reserves declined to $562 billion in August from $732 billion at the end of 2014.
Saudi Arabia has taken a series of austerity measures, including subsidy cuts and reductions in government salaries. Earlier this year, it announced a wide-ranging plan to diversify its economy.
Al-Assaf and his Gulf counterparts were to meet in Riyadh later on Wednesday with International Monetary Fund chief Christine Lagarde.
On Sunday, Saudi Oil Minister Khaled Al-Falih said the current cycle of falling crude prices is close to an end as market fundamentals improve.
Oil prices are hovering around $50 per barrel after hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014.
(Additional input from Agence France Presse)
Saudi financial position strong despite pressure on liquidity: Al-Assaf
Saudi financial position strong despite pressure on liquidity: Al-Assaf
