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Saudi faces reserves crunch as imports continue to grow

The recent decline in Saudi Arabia’s foreign reserves, a measure of its ability to support its dollar-pegged currency, was partly due to a lag between import payments and export receipts, the Saudi central bank governor told Reuters.

Net foreign assets at the central bank, known as SAMA, dropped monthly by roughly $8 billion to $436 billion in April and dropped further in May, recent central bank data showed, declining to about $433 billion, a level comfortably above what Saudi Arabia would need to protect the peg.

“Reductions in reserves over the past couple of months were mainly to finance a rebound in pandemic-hit import demand, while leads-and-lags in oil income (tax and dividends) cause some degree of fluctuation in SAMA’s reserves level,” said Fahad Al-Mubarak, the governor of the central bank.

“The rebound in import activity, which hit a low figure in May 2020, has preceded that in exports receipts. These shifts are expected given the extraordinary economic impacts over the last 18 months as economic conditions become more normalized,” the governor said in a statement to Reuters.

The value of Saudi imports in April amounted to SR49.1 billion ($13.09 billion), according to the most recent official trade figures. That is up 17.5 percent year-on-year and 33 percent when compared with May last year.

Source: Arab News

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