Saudi Arabia's PIF gets $40 billion from foreign reserves to fund overseas investments

RIYADH (Reuters) - Saudi Arabia transferred a total of 150 billion riyals ($40 billion) from central bank foreign reserves to fund investments by sovereign wealth fund PIF in March and April, the finance minister said on Friday.

FILE PHOTO: Saudi Minister of Finance Mohammed al-Jadaan attends a session at the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2020. REUTERS/Denis Balibouse/File Photo

Saudi Arabia’s central bank foreign reserves fell in March by nearly $27 billion month-on-month, their fastest rate in at least 20 years, to around $464.5 billion, according to Reuters calculations based on central bank data. April figures are not yet available.

Finance Minister Mohammed al-Jadaan said in a statement that the transfers to PIF were done on an “exceptional basis.”

The statement did not give a breakdown but a finance ministry official told Reuters that the government transferred $15 billion to the Public Investment Fund in March and another $25 billion in April, saying foreign reserves are expected to drop in April at about the same rate as the previous month.

The official said PIF had also converted into U.S. dollars part of its own riyal-denominated liquidity to back investments. The government did not expect a significant drop in central bank foreign reserves going forward and fluctuations will be in line with previous years, added the official, who asked not to be named because the details are not yet public.

“While foreign exchange flows since the start of the year are on average within historical levels, this measure (transfers to PIF) resulted in a reduction in net foreign reserves assets to support investment plans,” Jadaan said in the statement, adding that PIF investments would not be reflected in published central bank data.

“Maximising returns on the kingdom’s assets will reflect positively on economic performance and public finances and limit negative effects of the coronavirus pandemic. Returns on PIF investments will be available to support public finances when needed,” he said.

In April, the head of PIF, Yasir al-Rumayyan, said it was looking in to investment opportunities in areas such as aviation, oil and gas and entertainment.

The fund, which manages over $300 billion in assets and has stakes in Uber Technologies Inc UBER.N and electric car company Lucid Motors, had this year accumulated stakes in four major European oil companies and disclosed an 8.2% stake in cruise operator Carnival Corp CCL.N.

Earlier this month, it also disclosed stakes in Boeing Co BA.N, Citigroup Inc C.N, Facebook Inc FB.O, Walt Disney Co DIS.N and Marriott.

Jadaan also said in the statement that the government would continue to implement development plans to diversify the economy, increase local content and support private sector growth, whether through the general budget or through PIF and development funds.

The kingdom, the world’s largest oil exporter, slipped into a $9 billion budget deficit in the first quarter as oil revenue collapsed.

The finance ministry official said PIF is still going ahead with investments in domestic mega-projects under Crown Prince Mohammed bin Salman’s diversification drive, including the $500 billion NEOM economic zone, the Red Sea tourism project, and Qiddiya, an entertainment development that will include a Six Flags theme park.

He said the fund has significant liquidity in riyals from its own portfolio and from proceeds from last December’s initial public offering of state oil giant Saudi Aramco.

Reporting by Marwa Rashad in Riyadh; Additional reporting by Hesham Abdul Khalek in Cairo and Davide Barbuscia in Dubai; Editing by Ghaida Ghantous and Matthew Lewis