Saudi Arabian fund picked up stakes in a broad range of enterprises and sectors, including Facebook and Citi. Image Credit: AP

Riyadh: Saudi foreign reserves dropped sharply in April for a second consecutive month as the kingdom used tens of billions of dollars to back investments of its sovereign fund abroad.

Facing a collapse in oil revenue and a sharp widening of its deficit this year, between March and April it transferred $40 billion from its foreign reserves to the Public Investment Fund (PIF) to back investments abroad to maximize returns.

PIF last month disclosed the acquisition of billions of dollars of stakes in listed companies abroad, including Boeing, Citigroup, and Facebook.

Net foreign assets of the Saudi Arabian Monetary Authority (SAMA) dropped to $443.75 billion in April from $464.64 billion in March, according to SAMA data. Total reserves assets, which include foreign currency and deposits abroad as well as investment in foreign securities, dropped by nearly $25 billion month-on-month in April.

"Excluding the one-off transactions where part of the reserves were transferred to PIF to utilize the opportunity of investing in international markets under current circumstances, we are not seeing any extraordinary outflows in terms of foreign reserves," Finance Minister Mohammed al-Jadaan said.

March depletion

SAMA's net foreign assets had dropped by nearly $27 billion month-on-month in March, their fastest rate in at least 20 years.

"PIF constantly looks for long-term compelling investment opportunities at attractive prices," a spokesman of the fund said in an emailed statement to Reuters. "The current market environment presents a number of such opportunities, including in sectors and companies that are well positioned to drive economic growth and value creation moving forward beyond the current crisis."

The fund, with assets estimated at over $300 billion, said one of its sources of funding included capital injections made by the government.

Saudi banks to get a 50b riyal windfall
Riyadh: Saudi Arabia will pump 50 billion riyals ($13.3 billion) into the banking system to help manage the fallout from the coronavirus pandemic and the drop in oil prices.

The move by the Saudi Arabian Monetary Authority will support financial stability and boost credit facilities to the private sector, it said in a statement. The programme is aimed at helping banks amend and restructure loans without additional fees and support private sector employment.

As a result of the virus outbreak, Saudi banks are "expected to encounter a reduction in activities in 2020, which will reflect negatively on profitability and possibly increase defaults," the central bank said in its Financial Stability Report.

Hit simultaneously by lower crude prices and coronavirus shutdowns, Saudi Arabia's non-oil economy is expected to contract for the first time in over 30 years. The central bank had previously unveiled a 50 billion riyal programme to help mostly small private businesses in the country.

In March, the regulator urged banks to put in place a lending program for at least six months to "assist in maintaining employment levels."

- Bloomberg