Saudi Arabia’s reserves grow 6% to $452.8bn in July

Saudi Arabia’s official reserve assets increased to SR1.7 trillion ($452.8 billion) in July, marking a 6.06 percent year-on-year rise, according to recent data.

Data from the Saudi Central Bank, known as SAMA, revealed that international currency holdings — comprising currency and deposits abroad and investments in foreign securities— accounted for 94.53 percent of the total, amounting to SR1.61 trillion in July. This category saw a 6.54 percent increase during the period.

Official reserve assets also include monetary gold, special drawing rights, the International Monetary Fund’s reserve position, and foreign reserves.

July data showed that SDRs, making up 4.6 percent of the total at SR78.03 billion, decreased by 0.44 percent.

Created by the IMF to supplement member countries’ official reserves, SDRs derive their value from a basket of major currencies, including the US dollar, euro, Chinese yuan, Japanese yen, and British pound sterling. They can be exchanged among governments for freely usable currencies when needed.

SDRs provide additional liquidity, stabilize exchange rates, act as a unit of account, and facilitate international trade and financial stability.

The IMF reserve position totaled SR13.21 billion but decreased by 8.44 percent during this period. This category represents the amount a country can draw from the IMF without conditions.

Saudi Arabia boasts one of the highest reserve coverage ratios among Fitch-rated sovereigns, standing at 16.5 months of current external payments, according to a February agency report.

This ratio underscores the country’s strong capacity to meet its external financial obligations over an extended period, highlighting its economic stability and prudent management of foreign exchange reserves.

Since its inception in 1952, SAMA has been managing foreign exchange reserves, with significant scale management beginning in the 1970s.

According to the Swiss-based Bank for International Settlements, SAMA’s reserves management has evolved as it accumulated holdings and gained expertise over time.

It has also developed internal models to validate reserve adequacy and assess reserve requirements, taking into consideration global practices and incorporating specific macroeconomic factors relevant to Saudi Arabia.

These models are regularly back-tested to ensure their reliability.

According to BIS, SAMA has three primary investment objectives, including preserving capital, maintaining liquidity, and achieving returns compatible with its risk appetite.