Loans to the public sector in Saudi Arabia accelerated in April as the government opted to fund spending by bank borrowing rather than dipping into its foreign reserves.
Annual growth in government borrowing jumped to 35.9 per cent in April from the year earlier, up from 21.2 per cent the previous month, data from the Saudi Arabian Monetary Agency (Sama) showed. Bank claims on the government rose 10.6 per cent month-on-month.
“Saudi Arabia has quite a lot of projects they want to get under way,” said Khatija Haque, the head of Middle East and North Africa research at Emirates NBD. “This data seems to imply they are relying more on bank loans so far this year to pay for this rather than oil revenues.”
The kingdom plans to slow its spending to the lowest pace in more than a decade this year as the government responds to warnings that high expenditure risks running down oil wealth. Spending is budgeted to rise by 4 per cent to 855 billion riyals (Dh837.31bn).
But the government has so far not dipped into its extensive foreign currency reserves to pay for the expenditure. Sama’s stock of net foreign assets rose by almost US$12bn between March and April, indicating the government was keeping its oil revenues offshore, according to Ms Haque. Growth of government deposits in the banking system has also slowed this year.
Private sector credit expanded 11.8 per cent during April, down from 12.8 per cent on an annual basis the previous month.
The UAE Central Bank released data late on Thursday showing that the country’s current account surplus shrank by 6 per cent between 2012 and last year to $64.7bn.
“Higher oil and non-oil exports were offset by strong import growth, and increased outflows on the services balance as well as higher remittances abroad,” wrote Ms Haque in a research note released yesterday.
Emirates NBD was forecasting the current account surplus to fall further this year as stronger economic growth brought in more imports, she said.
tarnold@thenational.ae
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