Saudi Arabia’s Central Bank Sees Reserves Soar on High Oil Prices

Saudi Arabia’s central bank foreign reserves rose last month at their fastest rate for four years, Reuters reports on official data revealed on Monday.

The $13.3 billion month-on-month increase in reserves to $498.9 billion in April is the highest level reached in over year and reveals “the extent to which a rebound in oil prices is strengthening the kingdom’s finances,” Reuters reports, adding “last month’s sharp rise in the reserves suggested the government is no longer under major financial pressure, after the Brent oil price climbed to about $75 a barrel last month from around $50 in the middle of last year.”

Oil's price has nearly doubled in the last year.

Oil’s price has nearly doubled in the last year.

Despite the increase, Saudi Arabia’s government is still running a budget deficit, and the Kingdom would need oil prices to rise to $85-$87 a barrel on the Brent crude index to achieve a balanced budget this year, according to the IMF.

Another potentially positive sign for the Saudi economy in the central bank data is the increase in bank loans to the private sector, up 0.7 percent year-on-year, an increase for the first time in 13 months.

“If it continues, the rebound in bank lending could indicate the beginning of a recovery in the economy, which has been slumping because of new taxes, fees and other government austerity measures designed to cut the budget deficit,” Reuters notes.

Meanwhile, Saudi Arabia is working to placate international oil buyers by working with Russia and its OPEC partners to increase supply and keep oil prices from continuing to climb, though willing participation from other OPEC nations is far from a certainty, according to reports.

Oil futures dropped as much as 3.1 percent on Monday, following a 4 percent slump Friday, the most in three months, after Saudi Arabia and Russia indicated the supply glut that kept prices down had finally dwindled and the two producers were willing to increase production.