Daily Management Review

Saudi Arabia Transfers ‘$40 Billion’ To PIF


Saudi Arabia’s sovereign wealth fund tapped $40 billion from foreign reserves to fund overseas investments.

In a statement Saudi Arabia’s finance minister stated, during the March to April period the Kingdom   transferred a total of $40 billion (150 billion riyals) from central bank foreign reserves to PIF to fund investments by the sovereign wealth fund.
On a month-on-month basis, in March foreign reserves at the central bank fell by nearly $27 billion to around $464.5 billion. This rate of fall is the fastest in at least 20 years. Incidentally April 2020 figures have not yet been made public.
Finance Minister Mohammed al-Jadaan said in a statement that the transfers to PIF were done on an “exceptional basis.”
Although the Finance Minister’s statement did not provide a breakdown, an official from the finance ministry stated the government had transferred $15 billion to the Public Investment Fund  (PIF) in March and $25 billion in April.
The official went on to add, the PIF had also converted part of its own riyal-denominated holiding into U.S. dollars to provide for liquidity for investments.
Going forward, the Saudi government does not expect a significant drop in central bank foreign reserves and fluctuations will be in line with the previous years, said the official on the condition of anonimity since the details are yet to be made public.
“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,” said Jadaan in the statement while adding that PIF investments would not be reflected in published central bank data.
“Maximising returns on the kingdom’s assets will reflect positively on economic performance and public finances and limit negative effects of the coronavirus pandemic. Returns on PIF investments will be available to support public finances when needed,” said Jadaan.
Earlier last month, Yasir al-Rumayyan, PIF’s head had said, he was looking for investment opportunities in areas including aviation, entertainment, oil and gas.
In the statement Jadaan’s also mentioned that the government would continue to implement development plans to diversify the economy, increase local content and support private sector growth, whether through the general budget or through PIF and development funds.
During the first quarter of the year, Saudi Arabia, the world’s largest oil exporter, saw a $9 billion budget deficit following a collapse in the oil market.