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WEEKLY NEWSLETTER
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Saudi Arabia
Index
During the early 1980s, current account surpluses led to a
sharp increase in foreign asset holdings (see
table 11,
Appendix). As a result, the capital account was dominated by
outflows from both official institutions and the private sector.
With the current account registering sizable deficits after 1983,
the capital account has seen a reversal of these trends. A
reduction of foreign assets was followed by a significant inflow
of banking sector capital for the purchase of Saudi development
bonds. The private sector only began repatriating capital after
the Persian Gulf War ended. For much of the 1980s, private
individuals and companies placed a substantial amount of funds
overseas, a process that accelerated following the fall in oil
prices in 1986 and as a result of the Iran-Iraq War. Increased
confidence in the Saudi economy after the Persian Gulf War caused
the return of these funds. The inflow of private capital in 1991
allowed SAMA to stabilize official foreign exchange holdings and
spurred economic activity in the nonoil sector. Official asset
flows constituted the bulk of current account financing, a
process that became unsustainable following the massive
depletions to pay for the Persian Gulf War costs. As a result,
the government has engaged in significant commercial borrowing on
the international markets and instructed some of its public
enterprises (notably Saudi Aramco and Sabic) to do the same. With
the expectation that Saudi Arabia will continue to run current
account deficits during the foreseeable future, it is likely that
the capital account will be dominated by debt flows and a good
measure of private sector asset repatriation.
Data as of December 1992
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