Saudi Arabia’s foreign currency reserves plunged by more than $16 billion in July in the biggest slump since the outbreak of the Covid pandemic in 2020, the country’s central bank revealed in its monthly report.
The reserves in net foreign assets dipped to 1.53 trillion riyals ($407 billion), after rising in May and June, to the lowest level since 2009 as Riyadh cut oil production in a bid to balance prices.
Oil production in Saudi Arabia is expected to average 9 million barrels per day (bpd) in July, August, and September following a unilateral voluntary output cut of 1 million bpd that the country enacted in order to “support the stability of the oil market.”
The output cut was initially announced only for the month of July but was subsequently extended to August and September.
“The net foreign asset position should improve in September, especially when the first performance-linked dividend distribution” arrives from the country’s oil major Saudi Aramco, said Monica Malik, the chief economist at Abu Dhabi Commercial Bank. The company announced earlier this month that it planned to distribute performance-linked dividends over six quarters beginning in the third quarter of 2023.
Saudi Arabia’s receipts suffered from lower crude prices this year compared to 2022, when Riyadh earned nearly $326 billion in windfall tax. Revenues were also hit by reduced oil exports, economists say, warning that the country is at risk of a budget deficit.
Higher expenditures on diversification from oil amid reduced oil export profits resulted in a widening budget deficit for the world’s largest crude oil exporter, data showed earlier this month.
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