Capital outflows continue to “overshadow” efforts at economic reform in Saudi Arabia
Capital outflows continue to “overshadow” efforts at economic reform in Saudi Arabia, according to analysis from Bank of America Merrill Lynch.
Recent data on Saudi Arabia’s balance of payments suggest financial outflows accelerated compared to the same period last year, when adjusting for the issue of a $10bn syndicated loan. Outflows put further pressure on the riyal, which is pegged to the US dollar but has come under pressure from investors betting that the kingdom will be forced to revalue it. BAML’s Jean-Michel Saliba stressed the size of outflows are difficult to ascertain, but said outward investment from the kingdom’s Public Investment Fund “needs to be carefully managed in order not to pressure reserves”.
While the kingdom will benefit from the recent recovery in prices, oil is not expected to head back to the heights seen before the collapse in 2014. That’s led Riyadh to tap international debt markets for the first time in order to help fund plans to diversify the economy. Saudi Arabia set a record for an emerging economy with its debut sovereign bond issue in October last year, and is planning to follow it up with an Islamic bond issue as early as February.