Saudi Arabia's foreign assets plunged by around SR59 billion (Dh58.4bn) in the first two months of this year to reverse a rapid growth during the oil boom of the last seven years, official figures showed yesterday.

Although the world's oil powerhouse recorded its highest budget surplus in 2008, the foreign assets of its central bank plunged to nearly SR16,50.58bn at the end of February from SR1,709.99bn at the end of December, showed the figures by the Saudi Arabian Monetary Agency (Sama), which controls those assets.

A breakdown showed both deposits with banks abroad and investment in foreign securities recorded the largest decline as cash in vault and other miscellaneous assets remained almost unchanged at the end of February.

Sama gave no reason for the decline but crude prices lost nearly $100 in the last few months of 2008 after peaking at $147 in late July. In January and February, prices averaged around $40, below a third of July levels.

Strong crude prices through most of 2008 allowed the Kingdom, the world's top oil exporter, to record its highest ever budget surplus last year of nearly SR590bn. This has enabled it to sharply boost its foreign assets and slash its public debt to less than 15 per cent of the gross domestic product after surpassing the GDP in late 1999.

Sama's figures showed deposits with banks abroad slumped from SR379.4bn at the end of December to SR352.5bn at the end of February. Investment in foreign securities remained unchanged at around SR1,154bn at the end of January but dived to SR1,122.2bn at the end of February.

Saudi economists said they believed the decline was due to a sharp fall in crude prices and the Kingdom's oil production, a government decision to keep up with the projected record budget for 2009 and the policy of slashing public debt after swelling above the gross domestic product nine years ago. They also attributed the fall to a decline in the value of some of Sama's investments because of the global financial crisis.

Sama's report showed debt continued to decline despite lower oil prices, with bank claims on the public sector diving to its lowest in a year. From around SR241.9bn at the end of 2008, the claims plunged to SR209.5bn at the end of January. Most of the drop was in treasury bills, which slumped to SR93.8bn from SR119.2bn in the same period.

Sama's assets recorded their highest growth in 2008, leaping by more than SR500bn since January 1 because of the surge in oil prices and the Kingdom's output, which averaged around 9.2 million barrels per day.

The assets dipped to one of their lowest levels of below SR100bn in 1998 before they began their rapid climb to reach SR197bn in 2002. By the end of 2007, the assets had rocketed to SR1.196trn.

Bankers said the Kingdom's strong financial position and the sharp drop in its debt would enable it to face the fallout from the current global financial crisis.

In a study last week, the Saudi American Bank (Samba) said the global crisis has inflicted a loss of nearly $350bn on the foreign assets of Saudi Arabia and its partners in the six-nation Gulf Co-operation Council. But it noted Sama was less affected given its low risk exposure.

"Drawing from various sources, the overall level of GCC foreign assets [including official reserves], is thought to have been around $1.28trn at end-2007, with the majority accounted for by Sama, and the large SWFs of Abu Dhabi, Kuwait and Qatar," it said.

"Little official data on the composition of SWF assets is available, but it is clear that their value eroded."

Banks' net up

The combined net profit of Saudi banks increased to six billion Saudi riyals (Dh5.8bn) in the first two months of the year, from SAR5.2bn a year earlier, Al Riyadh daily reported yesterday.

The paper, citing central bank data, Saudi banking performance was improving gradually after a weak last quarter of 2008.