Saudi Arabia is seeking to cut its widening deficit and “reduce exposure to volatile equities markets amid the sustained slump in oil prices” as it draws down a reported $50-$70 billion from foreign holdings around the world in 2015, according to a Financial Times report.
The sale of assets is in line with estimates on Saudi Arabia’s projected 2015 fiscal year budget deficit.
“Defunding from international asset managers is natural given that oil revenues are low and fiscal breakeven for 2015 is above $100 per barrel,” Dr. John Sfakianakis, a Saudi economy expert and Regional Director, Ashmore Group told SUSTG.
“This process of defunding should moderate somewhat given the local bond issuance program ensues,” Sfakianakis said.
Government accounts with SAMA. Graphic via Jadwa Investment.
One source told the Financial Times that the withdraw of assets amounted, for many fund managers, to a “Black Monday” for those firms. Another source said that funds have been dependent on SAMA assets. “Since the third quarter of 2014, SAMA’s reserves held in foreign securities have declined by $71bn, accounting for almost all of the $72.8 billion reduction in overall overseas assets,” the report said.
[Click here to read the Financial Times report on CNBC.com]
