Lazy eyes listen
Saudi Arabia’s foreign currency reserves fell by more than $16 billion in July, the worst drop since the breakout of the Covid epidemic in 2020, according to the country’s central bank’s monthly report.
After growing in May and June, net foreign asset reserves fell to 1.53 trillion riyals ($407 billion), the lowest level since 2009, as Riyadh curbed oil production in an effort to balance prices.
Saudi Arabia’s oil production is scheduled to average 9 million barrels per day (bpd) in July, August, and September, following a unilateral voluntary output cut of 1 million bpd implemented by the country to “support the stability of the oil market.”
Initially, the output cut was only announced for one month.
“The net foreign asset position should improve in September, especially when the first performance-linked dividend distribution” arrives from the country’s oil major Saudi Aramco, said Monica Malik, the chief economist at Abu Dhabi Commercial Bank. The company announced earlier this month that it planned to distribute performance-linked dividends over six quarters beginning in the third quarter of 2023.
Lower crude prices this year reduced Saudi Arabia’s receipts compared to 2022, when Riyadh received about $326 billion in windfall tax. Reduced oil exports also hurt revenues, economists believe, putting the country at risk of a budget deficit.
Higher spending on diversification from oil, along with lower oil export income, resulted in the world’s largest crude oil exporter’s budget deficit worsening earlier this month, according to figures released earlier this month.