RIYADH: Saudi Arabia’s official reserve assets reached SR1.76 trillion ($469.83 billion) in August, the highest in 21 months and a 10 percent increase year-on-year, according to recent data.

Figures released by the Saudi Central Bank, known as SAMA, show these holdings include monetary gold, special drawing rights, the International Monetary Fund’s reserve position, and foreign reserves. 

The latter, comprising currency and deposits abroad as well as investments in foreign securities, made up 95 percent of the total, amounting to SR1.67 trillion in August. This category led the growth with 10.62 percent increase during this period. 

August data also showed that special drawing rights, making up 5 percent of the total at SR79.35 billion, increased by 2 percent. 

Created by the IMF to supplement member countries’ official reserves, SDRs derive their value from a basket of major currencies, including the US dollar, euro, Chinese yuan, Japanese yen, and British pound sterling. They can be exchanged among governments for freely usable currencies when needed. 

SDRs provide additional liquidity, stabilize exchange rates, act as a unit of account, and facilitate international trade and financial stability. 

The IMF reserve position totaled around SR13 billion, but decreased by 9 percent during this period. This category represents the amount a country can draw from the IMF without conditions. 

Saudi Arabia’s reserves, which include foreign exchange holdings, are among the highest in the world. According to Fitch Ratings, the Kingdom’s reserve coverage ratio, as of February, stood at 16.5 months of current external payments.

This high ratio is a testament to the Kingdom’s ability to meet its external financial obligations for an extended period, ensuring that the country remains resilient in the face of global economic uncertainties.

This also serves as a financial buffer, enabling it to navigate external pressures, such as fluctuations in oil prices, geopolitical tensions, or shifts in global market dynamics.

They also also play a key role in enhancing investor confidence in Saudi Arabia’s economy, as they signal the government’s capacity to meet its obligations and maintain economic stability.

For international investors, the combination of high reserves, a diversified economy, and strong fiscal management make Saudi Arabia an attractive destination for investment.

In addition to its fiscal strength, Saudi Arabia benefits from a high level of government and debt ratings which allow the Kingdom to access global capital markets with ease, raising funds through bond issuances and sukuk at competitive rates.

This financial flexibility ensures that the country can continue to finance its ambitious Vision 2030 projects, such as NEOM, the Red Sea Project, and the development of new urban centers, without disrupting its overall economic stability.

Saudi Arabia is undergoing a transformative expansionary strategy as part of its Vision 2030 framework, which seeks to diversify the nation’s economy away from its heavy reliance on oil revenues.

Sectors such as tourism, technology, infrastructure, and renewable energy are considered pivotal to the Kingdom’s long-term economic stability and require substantial investment to meet the Vision’s targets. 

As a result, government expenditures have risen significantly in recent years, and forecasts suggest the possibility of a fiscal deficit in the medium term as spending continues to expand.

Despite these spending challenges, Saudi Arabia is in a strong fiscal position. The Kingdom’s favorable government and debt ratings, combined with substantial foreign reserves, allow the country to manage the increased expenditures and potential deficits effectively.

Saudi Arabia has ample room to raise debt through various financial instruments, such as bonds and sukuk, to fund its large-scale development projects without encountering significant financial stress.

This capability has been further supported by the government’s prudent fiscal management, which continues to focus on maintaining the country’s overall economic health while ensuring that Vision 2030 projects are adequately financed.

The Ministry of Finance, in its pre-budget 2025 report, emphasized that the government intends to take advantage of favorable market conditions to implement alternative financing activities that can stimulate economic growth.

The strategy behind this approach is not only to provide the necessary funding for key projects but also to diversify the Kingdom’s financing channels.

By doing so, the government aims to maintain market efficiency, deepen its financial markets, and attract new investors, both domestically and internationally.

Moreover, the government’s fiscal policy is designed to strengthen its financial position by maintaining safe levels of reserves, which are essential for protecting the economy against external shocks.

RIYADH: Artificial intelligence is transforming the banking industry by creating seamless customer experiences, automatically detecting fraudulent activity, and completing time-consuming tasks normally performed by humans.

According to a report published this year by McKinsey, generative AI could add between $200 billion and $340 billion a year in value across the global banking sector, largely through increased productivity.

Earlier this year, Riyad Bank announced the launch of its new “Center of Intelligence,” which will introduce AI technologies and services to the Saudi banking sector.

Using machine learning and modeling, the center will offer a cutting-edge environment for AI-driven research, innovation and analysis. It will also use machine-learning techniques and solutions to improve the efficiency and effectiveness of the bank’s investments and operations.

Mazen Pharaon, chief digital officer at Riyad Bank, called AI “a strategic asset and game changer” for the industry.

“It’s also instrumental in helping us offer exceptional financial services to our customers and financial performance to our shareholders,” he told Arab News.

AI offers significant advantages over traditional, human-led methods, including enhanced efficiency, accuracy and scalability, Pharaon said.

“It enables us to process large volumes of data rapidly, delivering insights that would be challenging to obtain through conventional techniques.

“AI also facilitates accelerated decision-making and personalized services, boosting customer satisfaction and driving innovation.

“Additionally, AI helps us identify new business opportunities, reducing costs and improving risk management by identifying potential issues before they escalate.”

Money management has not been entirely handed over to the machines, however. AI-driven automated decisions at Riyad Bank are complemented by human oversight to guarantee accountability and ethical compliance.

“While AI excels at processing vast amounts of data and identifying patterns at scale, our experts are involved in reviewing and validating key decisions and their expected impact,” Pharaon said.

“This hybrid approach allows us to leverage AI’s power while preserving the essential human supervision and oversight in banking.”

Riyad Bank’s long-term vision is to extend AI across all business areas.

“Our aspiration at Riyad is to embed the use of AI, data science and advanced analytics in the bank’s DNA and overall processes,” Pharaon said.

Mashreq Bank, a privately owned bank based in the UAE, also uses AI-backed digital solutions, which analyze customer data to provide personalized financial recommendations and insights across various platforms.

Fernando Morillo, the group head of retail banking at Mashreq, believes AI will be integral to the future of banking services.

“We utilize AI in various ways to enhance customer experience and streamline operations,” Morillo told Arab News.

“We have launched a chatbot in the UAE, which is also being rolled out to other markets. This AI-powered chatbot can understand customer intent, translate it into actions, and provide 24/7 support.

“Our AI-backed chatbot has the ability to handle more than 80 different scenarios, anticipating customer needs and proactively offering solutions.”

Because data protection is a growing concern for every business, Mashreq offers advanced encryption techniques to ensure secure data-sharing protocols, and conducts regular security audits to safeguard customers’ information.

“Additionally, we implement rigorous testing and validation of our algorithms to ensure they meet ethical standards and regulatory requirements.”

Morillo said the ability of machine-learning models to continuously adapt to recognize new fraud tactics significantly reduces the risk of fraudulent activities and enhances overall security for customers.

“AI algorithms help us in analyzing vast amounts of data in real-time to identify patterns and anomalies that may indicate fraudulent activity,” he said. “This allows us to detect suspicious transactions, prevent fraudulent account openings, and reduce false positives.”

But Morillo does not believe that AI will replace humans entirely. Indeed, employees will still be needed to review AI activities and make adjustments as needed.

“While AI can provide insights, recommendations, and even decisions, ultimately humans supervise these systems to ensure decisions are fair, accurate, and compliant,” he said.

“This oversight is essential for maintaining accountability and addressing any ethical concerns that may arise.”