The Saudi Arabian Monetary Authority (SAMA)’s indicators have shown a recovery in imports in the Kingdom.
A recent drop to record lows in Saudi Arabia’s foreign reserves was partly due to a lag between import payments and export receipts; the Saudi central bank governor told Reuters.
Net foreign assets at the central bank, known as SAMA, dropped monthly by roughly $8bn to $436bn in April; their lowest in more than a decade, and dropped further in May, recent central bank data showed, declining to about $433bn.
Rebound in pandemic-hit import demand
“Reductions in reserves over the past couple of months were mainly to finance a rebound in pandemic-hit import demand, while leads-and-lags in oil income (tax and dividends) cause some degree of fluctuation in SAMA’s reserves level,” said Fahad al-Mubarak, the governor of the central bank.
The declines appeared counterintuitive given the recent rebound in oil prices. Also, some analysts said they could be linked to transfers to the Saudi sovereign wealth fund; Public Investment Fund, which last year got $40bn in reserves to fund investments.
“The rebound in import activity, which hit a low figure in May 2020, has preceded that in exports receipts. These shifts are to get the extraordinary economic impacts over the last 18 months; as economic conditions become more normalized,” the governor said in a statement to Reuters.
The value of Saudi imports in April amounted to SAR49.1bn ($13.09bn), according to the most recent official trade figures. That is up 17.5% year-on-year and 33 percent when compared with May last year.
Exports increased annually by 87 percent in April, with the value of oil exports up 109 percent year-on-year.
“The relatively limited productive base means that a pick-up in domestic demand due to the easing of COVID-19 restrictions largely-met by imports;” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“However, the sharp rise in oil price is boosting the exports; which we see outstripping import growth in 2021,” she said.