Saudi Foreign Reserves Drop Sharply, Deficit Balloons Due to Corona-Induced Oil Glut

Saudi Arabia’s foreign reserves declined nearly $27 billion in March – the steepest drop in at least 20 years – as the severe economic slowdown due to the coronavirus pandemic lowered demand for oil and sent oil prices and revenues into a tailspin. Oil revenues declined in the first quarter of 2020 at an annualized rate of 24%. The country’s net foreign assets, which include securities such as US Treasury bonds and foreign deposits, now total $464 billion – their lowest level since 2011. Meanwhile, on Wednesday, the kingdom’s Finance Ministry reported a first-quarter budget deficit of $9 billion. In 2019, Saudi Arabia had a first-quarter surplus of $7.4 billion. Finance Minister Mohammed al-Jadaan said last week the kingdom would not draw down more than $32 billion from its reserves this year and would instead increase its borrowing to nearly $60 billion to contain the widening deficit. Saudi Arabia had projected a deficit of $50 billion this year – 6.4% of gross domestic product – a 43% increase over last year’s $35 billion deficit. But that was before the coronavirus crisis and plunge in oil prices. The finance minister now says this year’s deficit could widen to 9% of GDP, but some analysts predict a deficit amounting to 22% of GDP.