Saudi Arabia shifted foreign reserves worth $40 billion to PIF

Saudi Arabian finance minister Mohammed Al-Jadaan stated that the kingdom shifted a total of $40 billion from central bank foreign reserves to finance investments by sovereign wealth fund PIF in March and April.

Saudi Arabia’s central bank foreign reserves had dropped nearly $27 billion based on month-on-month estimations for the month of March. It was the steepest drop in the last 20 years, to $464.5 billion. April figures are yet to be published.

Finance Minister Mohammed al-Jadaan said that the shift to PIF was done on an “exceptional basis.” Even though the official statement didn’t give a breakdown but reports suggest that the ministry transferred $15 billion to the Public Investment Fund in March and another $25 billion in April citing the trend of foreign reserves anticipated to fall in April at about the identical pace as the past month.

The administration do not foresee a notable reduction in central bank foreign reserves going forward and variations are expected to be in line with prior years.

“While foreign exchange flows since the start of the year are on average within historical levels, this measure (transfers to PIF) resulted in a reduction in net foreign reserves assets to support investment plans”
– Mohammed al-Jadaan
Finance Minister, Saudi Arabia

“Maximising returns on the kingdom’s assets will reflect positively on economic performance and public finances and limit the negative effects of the coronavirus pandemic. Returns on PIF investments will be available to support public finances when needed,” Mr. Jadaan added.

Earlier in April, Yasir al-Rumayyan, Governer of Public Investment Fund said it was looking into investment opportunities in areas such as aviation, oil and gas and entertainment.

The fund, which handles over $300 billion in assets and has ownerships in Uber Technologies Inc and electric car company Lucid Motors, had this year acquired stakes in four major European oil companies and published an 8.2% stake in cruise operator Carnival Corp.

Earlier this month, it also revealed shares in Boeing Co, Citigroup Inc, Facebook Inc, Walt Disney Co and Marriott.

Mr. Jadaan added that the administration would proceed to complete development plans to expand the economy, improve local content and support private sector growth, whether through the general budget or through PIF and development funds.

The finance ministry said irrespective of the oil price fluctuations, PIF is still going forward with investments in domestic mega-projects under Crown Prince Mohammed bin Salman’s diversification drive, including the $500 billion NEOM economic zone, the Red Sea tourism project, and Qiddiya, an entertainment development that will include a Six Flags theme park. The ministry continued the fund has substantial liquidity in riyals from its own portfolio and from incomes from last December’s initial public offering of state oil giant Saudi Aramco.