Saudi Arabia’s holding of US bonds amounted to $127.3bn in May

A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in New York City. (Reuters)
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Updated 20 July 2021

Saudi Arabia’s holding of US bonds amounted to $127.3bn in May

  • The Kingdom is the 14th largest holder of US debt. Japan remains number one

RIYADH: Saudi Arabia’s holding of US Treasury securities amounted to $127.3 billion in May 2021, according to new data from the US government.
The amount was down 3 percent compared to April but up 3 percent compared to May 2020. This year-on-year increase is in line with global trends, as countries around the world increased their holdings by 2.25 percent in the year leading up to May 2021.
However, analysis showed that Saudi holdings are still down from their peak of $184.4 billion in February 2020. As the global pandemic took hold in March last year, the Saudi government decreased its holding by 25 percent and by a further 33.8 percent in April, as the Kingdom’s reserves were hit by the collapse in oil prices.
“The decrease in Saudi holdings of US treasuries follows the larger trend of the Kingdom drawing down its total foreign reserves to support the economy’s rebound in the wake of the pandemic. The economy has gradually rebounded since pandemic-induced restrictions limited commercial and consumer spending,” Albara’a Al-Wazir, an economist at the US-Saudi Business Council, told Arab News.
“The increase in spending has brought a surge in imports to accommodate growing demand. In order to finance the growth in imports, Saudi Arabia targeted its foreign reserves, as was recently stated by the Saudi Central Bank’s governor,” he added.
In August last year, Saudi Arabia began to boost its holdings once again, peaking in November and then continuing to decline by low single percentages ever since.
“The rate of decline has recently slowed, with small additions depending on the vagaries of oil prices, which will continue to be the key parameter for either additions or drawdowns in the next few months. With oil prices forecast at around the $72-75 ranges, or even higher in the first quarter of 2022, there will be some expected Saudi T bill additions,” Mohammed Ramady, former professor of finance and economics at King Fahd University of Petroleum and Minerals, told Arab News.
The Kingdom is the 14th largest holder of US debt. Japan remains number one, with $1266.2 billion in US bonds, followed by China ($1078.4 billion), the UK ($467.7 billion), Ireland ($304.9 billion) and Luxembourg ($287.6 billion).
The UAE holds $57.3 billion, an increase of nearly 100 percent year-on-year. Kuwait holds $45.9 billion, up just 5 percent year-on-year.

Pakistan currency dealers offer $24 billion loan to government as alternative to IMF bailout

Updated 31 March 2023

Pakistan currency dealers offer $24 billion loan to government as alternative to IMF bailout

  • Local dealers say financing will be arranged through currency swap agreements with local and overseas Pakistanis
  • Economists say the proposed plan is not sustainable and may put the country back on FATF’s radar screen

KARACHI: As an alternative to the International Monetary Fund’s (IMF) bailout program, Pakistani currency dealers have offered to arrange about $24 billion to shore up the country’s foreign exchange reserves for the next two years “in the larger interest of the country,” an official said on Friday.
Cash-strapped Pakistan is currently in talks with the IMF for the completion of the ninth review of the $7 billion bailout program signed in 2019. However, no progress has been made until now to reach a staff-level agreement, even as the government has implemented several harsh conditions to fulfill the lender’s requirements.
Pakistan desperately awaits the disbursement of $1.2 billion from the IMF under the loan program since it would boost the country’s low foreign exchange reserves which currently stand at $4.2 billion, barely enough to cover one month of imports.
The country’s currency dealers have offered to arrange the much-needed dollars in this context through a swap agreement with overseas and local Pakistanis to steer the economy out of the current crisis.
“We offered the government six months back to arrange $24-25 billion through outright purchases from Pakistanis at least for two years,” Malik Bostan, president of the Exchange Companies Association of Pakistan (ECAP), told Arab News on Friday.
Bostan said he repeated the offer during a recent meeting with the members of the Senate Standing Committee on Finance in Islamabad.
“The companies have offered to arrange funds of $1 billion per month for the government so that the country can get rid of the IMF program,” he said, adding that the exchange companies were already contributing $400 million per month to the interbank market.
Asked to further elaborate the plan, the ECAP president said currency dealers would approach overseas and local Pakistanis and offer currency swap agreement for the well-being of the country.
“Under the agreement, we will take loans for a certain agreed period and offer them the current exchange rate,” he explained. “They will benefit from the exchange rate fluctuations, and appreciation at the end of the contract term.”
Bostan said the idea to raise dollars for Pakistan was not new as a similar approach was adopted back in 1998 through which $10 billion were raised with the permission of then prime minister, Nawaz Sharif, and central bank governor, Muhammad Yaqub.
“We had toured Saudi Arabia, the United Arab Emirates, and the United States, and approached Pakistanis, and they had responded well,” he continued. “The country is still reaping the benefit of 1998 fundraising.”
The ECAP official said the exchange companies needed the government’s approval to implement the proposed financing arrangement which required direct dollar purchases from abroad and people at home.
While Bostan said the government’s nod will allow the country to get the much-needed funds, Pakistani economists termed the idea “unsustainable” and risky which could put the country back on the Financial Action Task Force’s (FATF) radar.
“The financing solution proposed by the exchange companies may provide short-term relief, but it is not a long-term solution and there is a risk of putting the country back on the FATF watch list,” Dr. Sajid Amin, deputy executive director at the Sustainable Development Policy Institute (SDPI), told Arab News. “The government must stick to the IMF program and complete the reforms that the country needs for its long-term survival.”
Amin said the current IMF program seemed “tough” but it was because the authorities had failed to implement structural reforms which were mutually agreed with the fund.
“We have been playing politics with the IMF program which has delayed the implementation of prior actions,” he continued.
Amin added the conditions seemed tough because of the implementation timeframe which was short.
Pakistan has approached the IMF 23 times in its history to get bailout programs but has only completed one of them.

Public sector should lead in financing energy transition, HSBC MENA chairman tells FII

Updated 31 March 2023

Public sector should lead in financing energy transition, HSBC MENA chairman tells FII

  • Samir Assaf praised the example of PIF in taking more of the primary risk
  • NEOM deputy CEO stressed importance of energy transition projects in creating long-term sustainable capital

MIAMI: The public sector should lead the way in supporting the financial costs of the energy transition, said Samir Assaf, chairman of HSBC Middle East and North Africa.

During the FII conference in Miami, Assaf argued that public institutions around the world should follow the example of the Public Investment Fund, or PIF, the Kingdom’s sovereign wealth fund, when it came to supporting the initial losses that could occur in making these kinds of investments.

“I think that PIF is giving us a great example through the loss of equity investment they are doing in hydrogen or in NEOM,” Assaf said.

“When you think about the reform that is happening, or will happen at the World Bank, the essence of this reform is to make sure that the World Bank is deploying more toward the energy transition and taking more of the primary risk to support (the) financing of this energy transition.

“In my view 60, 70, 75 percent of the risk of the equity should come from the public sector,” he said.

Assaf said that although banks maintained a key position in financing activities aimed at achieving net zero in 2050, “the reality is that we are all in this journey together and everyone is in this role, and I really have a call to public money to come and be the first loss of this transition.”

At the panel, speakers pointed to the urgency of accelerating the transition to green energy, reducing greenhouse gas emissions and prioritizing more resilient infrastructure in vulnerable communities.

The focus was on low and zero carbon technologies that would drive opportunities for investors, including capturing and removing carbon, carbon neutralization and scaling up solutions such as green hydrogen and sustainable aviation fuel.

“There’s a lot of money right now that’s positioned to go after technologies that may or may not be able to solve that problem in an adequate way,” said Steve Shallenberger, CEO of environmental technologies company, Rivotto.

“As a collective, we are at a very serious inflection point where we have to make the right decisions” to avoid “putting financial burdens and hand over an Earth that’s not suitable for future generations.”

During the panel discussion, participants also talked about the responsibility of the Global North in financing the transition toward green energy.

The general consensus among speakers was that the deployment of new technologies and the scaling up of those technologies would happen in the north, where the current competence sits, and the deployment of those technologies at scale would happen in the Global South.

The speakers added that the rollout would represent “a very interesting opportunity” for countries in the southern hemisphere to generate long-term attractive returns.

“The R&D (research and development), the proof of concept and the commercial scaling up, that is likely to happen in the North,” said Assaf.

“But the deployment of those technologies at scale is going to happen in the Global South. And that’s where the opportunity is.”

In a separate panel, NEOM’s Deputy CEO Rayan Fayez also stressed the importance of harnessing the opportunity offered by these projects to create long-term sustainable capital, while at the same time creating an impact on the rest of the world.

“It’s a balanced approach between economic development and economic returns, but at the same time creating impact that goes beyond projects like NEOM,” Fayez said. “We’re trying to redefine how businesses coexist with nature.”

“We’re addressing livability challenges and you’ve seen some designs of The Line. What we’re doing is redesigning how people could live better in the future with less infrastructure, with less footprint to occupy, with better proximity, no cars, no CO2 emissions,” he said.

“All of that coming together is creating an ecosystem where we are solving challenges that have existed all around the world but people have not had the chance of having a blank canvas in the way we do, the vision, and the way our chairman does, to recreate it and experiment with it at scale like we are in NEOM.”


Oil rises on US crude draw and Iraqi supply risks

Updated 30 March 2023

Oil rises on US crude draw and Iraqi supply risks

  • US crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low
  • Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts

LONDON: Oil prices rose on Thursday as a surprise drop in US crude stockpiles and a halt to exports from Iraq’s Kurdistan region offset a smaller than expected cut to Russian supplies.
Brent crude futures rose 57 cents, or 0.73 percent, to $78.85 a barrel by 1327 GMT, while West Texas Intermediate crude rose 82 cents, or 1.12 percent, to $73.79.
US crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low, the Energy Information Administration said on Wednesday.
Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts.
The continuing halt to exports from Iraq’s northern region provided further support.
Producers have shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq after the northern export pipeline was shut, with more outages on the horizon, company statements showed.
But the Kurdistan-Iraq premium in oil prices could vanish sooner than expected, Citi analysts said Thursday.
The “changes in Iraq’s domestic politics may lead to a durable political settlement very soon,” Citi said, estimating that pipeline flows could increase by 200,000 barrels per day (bpd).
These factors offset bearish sentiment after a lower than expected cut to Russian crude oil production in the first three weeks of March.
The 300,000 bpd production decline compared with targeted cuts of 500,000 bpd, or about 5 percent of Russian output, sources familiar with the data told Reuters.
Markets are now waiting for US spending and inflation data due on Friday and the resulting impact on the value of the US dollar.
Meanwhile, OPEC+ is likely to stick to its existing deal on reduced oil output at a meeting on Monday, five delegates from the producer group told Reuters.
“While we think oil prices may remain volatile in the near term, we still expect rising Chinese crude imports and lower Russian production to lift prices over the coming quarters,” UBS said on Thursday.
China’s refined fuel consumption this year is likely to grow 3 percent from 2019 pre-COVID levels, state energy giant PetroChina said on Thursday.
“If all goes as expected, and we manage to avoid a recession, oil prices will dance around $75-$85/bbl in the coming months,” FGE analysts said in a note.


Ramadan treats at risk as prices of Saudi dates double in Pakistan amid economic turmoil

Updated 29 March 2023

Ramadan treats at risk as prices of Saudi dates double in Pakistan amid economic turmoil

  • Saudi dates make a much-loved culinary treasure for Pakistani people in the Muslim fasting month
  • Traders say the surge in prices brought down domestic demand after low date production in Pakistan

KARACHI: Pakistan's ongoing economic crisis, caused by a major dollar liquidity crunch, has doubled the cost of Saudi dates, said local traders on Tuesday, after the country lost much of its own crops in the wake of the monsoon floods that destroyed farmlands in the southern region of Sindh and Balochistan last year.

Saudi dates are a much-loved culinary treasure for Pakistani elites in the Muslim fasting month of Ramadan. Traditionally, the prices of these dates remain high in the local market due to their quality. They are also the top choice of affluent classes in Pakistan.

Ajwa, Ambar, Safwai, Sukkari, Barhi, Saghai, Kalmi, Khudri, Kholas and Medjoul are the most famous Saudi dates sold in Pakistan. However, local traders say the prices of Saudi dates had doubled while the sales had reduced this year.

“Last year, the rate of Sukkari dates was Rs1,100 per kilogram,” Sher Zaman Khan, a local dealer, told Arab News on Tuesday. “This year, it rate has increased to Rs2,200. The rate of Kalmi dates stood at Rs900 but it has gone up between Rs1,700 and Rs1,800. Last year, the cost of Ambar date were Rs1,400 but they are sold for Rs2,800 this year.”

With an annual production of around 1.1 million tons, Saudi Arabia is one of the top producers and exporters of dates. Pakistan, which is also among the world's top 10 date producers with about 500,000 tons of annual yield, meets half of its demand through imports, mainly in the holy month of Ramadan.

Dealers said the quantity of Saudi dates had substantially declined in Pakistani market due to restrictions on imports, coupled with the widespread devastation caused by last year's floods in the dates growing areas of Sindh and Balochistan.

“The demand for Saudi dates has declined because of the diminishing purchasing power of people,” Hanif Baloch, an importer and dealer of the fruit, told Arab News. “Even those belonging to high income classes have started thinking before buying.”

A boy stands beside a sugarcane field, which is submerged by floodwaters due to heavy monsoon rains, in Dera Allahyar area of Jaffarabad, a district of southwestern Balochistan province, Pakistan, Saturday, Sept. 17, 2022. (AFP/File)

Another importer, Haji Abubaker, who used to travel to Saudi Arabia to personally pick up Arabian dates right from the farms in the kingdom, said he could not import dates this year due to government-imposed restrictions.

Pakistan decided to restrict its imports in recent months to prevent the outflow of dollars by slowing down cargo clearance from ports. The banks operating in the country also started delaying or denying opening letters of credit (LCs).

“We were expecting that there would be a shortage of dates during Ramadan after the domestic crop loss and lack of LCs, but this was compensated by the high prices which subdued the demand,” Muhammad Sabir, chairman of Khajoor Market Association, said.

Pakistani farmers said last year's devastating rains had left nothing of the domestically produced dates for Ramadan consumption.

“In Sindh, dates are cultivated on 105,000 acres of land, of which the fruit was ready at 98,000 acres,” Nabi Bux Sathio, senior vice president of the Sindh Chamber of Agriculture, told Arab News. “The fruit was manually picked up and placed on the ground to dry, but rains ruined it, leaving nothing for this Ramadan.”

Despite the reduced sales and production cuts, Pakistanis will still be able to taste Saudi dates after the kingdom presented 100 tons of its produce to the South Asian country.

The Saudi envoy to Pakistan, Nawaf bin Said Al-Malki, and the director of King Salman Humanitarian Aid and Relief Center, Dr Khalid M. Al-Othmani, handed over the fruit to Pakistan for distribution in the country.

SRMG launches new venture capital arm, SRMG Ventures

Updated 28 March 2023

SRMG launches new venture capital arm, SRMG Ventures

  • SRMG’s new venture capital arm focuses on supporting content creation and digital media platforms
  • Inaugural investments in disruptive regional production house Telfaz11 and immersive video platform VUZ

RIYADH: SRMG, a global integrated media group, today announced the launch of its corporate venture capital arm, SRMG Ventures.

In line with SRMG’s transformative growth strategy, SRMG Ventures will invest in early-stage companies and technologies within the core target areas: media creators, digital media, media enablers and tools, including generative AI, as well as immersive and interactive entertainment. SRMG Ventures will initially target investments from the seed to Series B stage.

SRMG Ventures will enable SRMG to back and empower regional talent and entrepreneurs, acting as a catalyst for further growth of the rapidly evolving media industry in the region.

SRMG Ventures will provide SRMG with direct access to innovative technologies, as well as new media talent and content creators, that will continue to enhance SRMG’s own media portfolio and drive forward the future of media. The new corporate venture capital arm will additionally help SRMG penetrate new markets and further diversify its business offering, whilst generating tangible financial returns.

SRMG Ventures has also announced inaugural investments and partnerships with two fast-growing companies:

  • Telfaz11: a Saudi-based creative media studio specializing in locally relevant entertainment content, and producer of the box office hit “Sattar” and feature film “Alkhallat+” which was one of the top ten most watched movies in Saudi Arabia on Netflix.
  • VUZ: a leading VR-enabled social media app that allows users to engage with 360o videos enabling a new level of immersive realism.

Jomana R. Al Rashid, CEO, SRMG said: “We are excited to continue to lead and support the growth of the dynamic and fast-growing media and content industry in Saudi Arabia and beyond. Our new venture capital arm, SRMG Ventures, will enable us to discover and nurture new talent and content creators, and leverage the latest advances in virtual reality and artificial intelligence.

“The adoption of cutting-edge technologies will invigorate SRMG’s products and services, further elevating content offerings and experiences for our local and global audiences. Our first investments in two leading companies, one local and one regional, led by exceptional creatives from the Arab world, mark the beginning of this thrilling endeavor.”

The announcement comes at an important moment for the MENA media and venture capital sectors. The MENA media and entertainment sector is expected to grow at 9 percent to exceed $20 billion by 2026, outpacing global growth.

In addition, the MENA region, and Saudi Arabia in particular, is experiencing a vibrant entrepreneurial ecosystem, with venture capital funding crossing the $3bn mark in 2022, an annual rise of 8.3 percent, with Saudi Arabia startups securing $987m in 2022, a 72 percent increase compared to 2021.