Saudi Arabia’s PIF gets $40b from foreign reserves to fund overseas investments

FILE PHOTO: Saudi Minister of Finance Mohammed al-Jadaan attends a session at the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2020. REUTERS/Denis Balibouse/File Photo

Saudi Arabia transferred a total of 150 billion riyals ($40 billion) from central bank foreign reserves to fund investments by sovereign wealth fund PIF in March and April, the finance minister said on Friday.

Saudi Arabia’s central bank foreign reserves fell in March by nearly $27 billion month-on-month, their fastest rate in at least 20 years, to around $464.5 billion, according to Reuters calculations based on central bank data. April figures are not yet available.

Finance Minister Mohammed al-Jadaan said in a statement that the transfers to PIF were done on an “exceptional basis.”

The statement did not give a breakdown but a finance ministry official told Reuters that the government transferred $15 billion to the Public Investment Fund in March and another $25 billion in April, saying foreign reserves are expected to drop in April at about the same rate as the previous month.

The official said PIF had also converted into U.S. dollars part of its own riyal-denominated liquidity to back investments. The government did not expect a significant drop in central bank foreign reserves going forward and fluctuations will be in line with previous years, added the official, who asked not to be named because the details are not yet public.

“While foreign exchange flows since the start of the year are on average within historical levels, this measure (transfers to PIF) resulted in a reduction in net foreign reserves assets to support investment plans,” Jadaan said in the statement, adding that PIF investments would not be reflected in published central bank data.

“Maximising returns on the kingdom’s assets will reflect positively on economic performance and public finances and limit negative effects of the coronavirus pandemic. Returns on PIF investments will be available to support public finances when needed,” he said.

In April, the head of PIF, Yasir al-Rumayyan, said it was looking in to investment opportunities in areas such as aviation, oil and gas and entertainment.

The fund, which manages over $300 billion in assets and has stakes in Uber Technologies Inc and electric car company Lucid Motors, had this year accumulated stakes in four major European oil companies and disclosed an 8.2% stake in cruise operator Carnival Corp.

Earlier this month, it also disclosed stakes in Boeing Co, Citigroup Inc, Facebook Inc, Walt Disney Co and Marriott.

Jadaan also said in the statement that the government would continue to implement development plans to diversify the economy, increase local content and support private sector growth, whether through the general budget or through PIF and development funds.

The kingdom, the world’s largest oil exporter, slipped into a $9 billion budget deficit in the first quarter as oil revenue collapsed.

The finance ministry official said PIF is still going ahead with investments in domestic mega-projects under Crown Prince Mohammed bin Salman’s diversification drive, including the $500 billion NEOM economic zone, the Red Sea tourism project, and Qiddiya, an entertainment development that will include a Six Flags theme park.

He said the fund has significant liquidity in riyals from its own portfolio and from proceeds from last December’s initial public offering of state oil giant Saudi Aramco.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.