A Saudi money changer displays Saudi Riyal banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016. REUTERS/Faisal Al Nasser
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Net foreign assets at Saudi Arabia's central bank, a measure of its ability to support its currency, look set to fall sharply this year as oil prices slump and Riyadh expands its sovereign wealth fund to invest abroad.This year, an austerity drive and a partial rebound in oil prices have helped Riyadh make progress in cutting the deficit, which narrowed 71 percent from a year ago to 26 billion riyals ($6.9 billion) in the first quarter. But net foreign assets have continued to shrink at about the same rate, by $36 billion in the first four months of 2017 – a mystery to economists and diplomats monitoring Saudi Arabia, and a potential blow to markets' confidence in Riyadh.A fresh slump in oil prices also looks likely to pressure foreign assets.That would be an improvement from last year's 297 billion riyals, but combined with transfers to the PIF, it would force further liquidation of the central bank's foreign assets.A senior Finance Ministry official estimated last month that local bonds would cover 25 to 35 percent of the 2017 deficit; this would leave a sizeable amount to be covered with foreign assets.
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