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Saudi withdraws 70 billion from asset managers

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Saudi Arabia has withdrawn as much as $70 billion of its assets held abroad as the kingdom’s lavish spending and its destructive war on Yemen is burning through reserves at a blistering pace. 

According to financial services market intelligence company Insight Discovery, Saudi rulers are using the assets to plug the budget deficit which the International Monetary Fund predicts to exceed $107 billion this year.

The financial news and data provider Bloomberg, citing asset managers, said the Saudi Arabian Monetary Authority (SAMA) has pulled out between $50 billion to $70 billion of the funds held abroad over the past six months.

“Saudi Arabia is withdrawing funds because it’s trying to cut its widening deficit and it’s financing the war in Yemen,” it quoted Nigel Sillitoe, CEO of the Dubai-based Insight Discovery, as saying.

The kingdom is facing a backlash from its move to flood the market with excess oil in order to drive down prices for political reasons.

Saudi Arabia’s foreign reserves have hit record lows from a peak of $737 billion in August 2014 and are falling by at least $12 billion a month at current levels.

“Foreign-exchange reserve depletion, rather than accumulation, is the new reality for Saudi Arabia. None of this should come as much surprise given the current-account deficit and risk of capital flight,” Bloomberg said.

Saudi Arabia faces a crisis after its misjudged gamble on oil.

Oil income accounts for about 80% of revenue in the country of about 30 million people.

With spending forecast to reach 1,082 billion riyals (more than $270 billion) this year, Saudi Arabia’s fiscal deficit could rise to around $140 billion or 20% of GDP, according to the IMF.

Saudi rulers have already borrowed $4 billion from local banks and plan to raise as much as $26 billion in bonds before the end of the year.

Standard and Poor’s cut its credit outlook for Saudi Arabia in February to negative from stable, saying it viewed the country’s economy “as undiversified and vulnerable to a steep and sustained decline in oil prices”.

The kingdom’s finances are depleted at an alarming rate by continued subsidies, handouts to public sector workers in order to keep dissent in check, the Yemen war and a patronage system which has expanded over years.

Saudi Arabia is also engaged in a massive military buildup that will catapult the kingdom to the fifth place in the world ranking for military spending.

10 Comments on "Saudi withdraws 70 billion from asset managers"

  1. ghung on Wed, 30th Sep 2015 6:50 pm 

    Easy come – Easy go. “…withdrawn as much as $70 billion of its assets…”

    ‘Withdrawn’? Is that sort of like selling shit to cover your losses? Exactly like selling shit to cover your losses?

    What happens when there are no buyers?

  2. apneaman on Wed, 30th Sep 2015 6:56 pm 

    It’s expensive to keep the Saudi youth extracurricular activities programmes running. Would not want all that testosterone misdirected.

  3. BC on Wed, 30th Sep 2015 7:27 pm 

    I personally know asset managers facilitating Arab oil emirates’ selling of real estate, corporate debt, and other US assets. It appears that the process is only beginning.

  4. makati1 on Wed, 30th Sep 2015 9:00 pm 

    BC: Yep! The first snow crystal is rolling down the mountain hitting others as it passes and increasing the flow. The selling of assets/USBs/USTs, etc will accelerate as the collapse avalanche continues. Should be an exciting show.

  5. makati1 on Wed, 30th Sep 2015 9:04 pm 

    Ap, got that right. Most of Saudi’s population is supported in some way by the oil profits. Millions of unemployed, dissatisfied young men are a danger to any government. The explosions could happen in many countries these days. Europe is ripe. So is Japan. Even the US. China is shipping it’s problems out to ‘protect’ its far flung commercial interests. Should be interesting.

  6. Baptised on Thu, 1st Oct 2015 1:18 pm 

    So this money problem was self imposed and SA is buying military items. Could some of their reasoning be, Get bonds out of USA? 18 trillion in dept and still rising.

  7. makati1 on Thu, 1st Oct 2015 8:47 pm 

    Baptised, I think you may be correct. What better excuse to pull out of USDs than a problem requiring that cash now? There are some $4 Trillion worth of those IOUs to be redeemed. What will that do to the US economy? Print Zimbabwe style until it all crashes down? We shall see.

  8. BobInget on Fri, 2nd Oct 2015 2:12 pm 

    While I don’t doubt for a minute the basic truth of the piece, reread it and see how almost every word is slanted against the Kingdom’s survival.

    (Press TV is the Iranian propaganda arm)

    Whatdaya expect, sympathy?

  9. Davy on Fri, 2nd Oct 2015 2:15 pm 

    Exactly BB, extremism is the name of the game today. We as a global people are looking more and more like what happened in the 30’s

  10. BobInget on Fri, 2nd Oct 2015 2:17 pm 

    As for safe harbors, look North.. Unless you live around the Arctic Circle. Then, keep drying fish.

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