Saudi Arabia transfers $40bn to Public Investment Fund to capitalise on opportunities amid Covid-19

Saudi Arabia transferred 150 billion Saudi riyals ($40bn/Dh146.52bn) from its central bank's foreign exchange reserves to its sovereign wealth fund in March and April, as it seeks to boost economic growth and take advantage of investment opportunities that have materialised amid the coronavirus outbreak.

The transfers from the Saudi Arabian Monetary Authority to the Public Investment Fund were made “exceptionally”, to maximise the returns on the kingdom’s assets and reduce the negative effects of the Covid-19 pandemic, finance minister Mohammed Al Jadaan said, according to a Saudi Press Agency report on Friday.

The minister said the decision was made after a “comprehensive study and taking into consideration the sufficient level for foreign-currency reserves”.

He also emphasised the “vital role” the PIF plays in “diversifying and strengthening economic growth” in the kingdom.

“Maximising returns on the kingdom's assets will reflect positively on economic performance and public finances and limit [the] negative effects of the coronavirus pandemic," Mr Al Jadaan said.

"Returns on PIF investments will be available to support public finances when needed.”

While currency exchange flows are on average within historical norms, a noticeable decline in foreign currency reserves is due to the transfer, he said.

Mr Al Jadaan said that PIF investments are not reflected in published central bank data.

The world’s largest oil exporter, which has embarked on an economic diversification programme to reduce its reliance on oil revenue, has broadened its investment portfolio in the last few years.

Earlier this month, the PIF revealed in a quarterly disclosure filing to the US Securities and Exchange Commission that it spent billions of dollars to pick up stakes in major overseas companies such as Boeing, Disney, Facebook, BP, Citigroup, Bank of America and cruise operator Carnival.

The investments – made as the pandemic disrupted global business, sunk stock prices and forced companies to sell debt – will help generate returns in the long-term and drive Saudi Arabia’s economic growth, the PIF said.

The fund, which manages about $320bn of assets, has previously bought stakes in Uber Technologies, Tesla and SoftBank Group's Vision Fund to expand its global portfolio.

Mr Al Jadaan said the government will continue to carry out its development plans to “support growth and economic diversification and enhance the role of the private sector and support local content”, whether through the state’s general budget, development funds or the PIF.

Last week, the kingdom announced a phased plan to reopen economic activities while protecting public health.

Domestic air travel services are set to resume and employees will return to their offices on Sunday.

“It is time to restore the movement to economic activity,” Mr Al Jadaan said.

He said following social distancing guidelines was imperative to avoid a return to the suspension of economic activities.

Saudi Arabia had 81,766 confirmed Covid-19 cases and 458 deaths, according to the Johns Hopkins University tracker, as of Saturday. More than 54,500 people have recovered.

The government has reassigned its spending over the last few months by increasing expenditure within the healthcare sector to deal with the virus outbreak and introducing support initiatives to help the private sector, Mr Al Jadaan said.

He said the kingdom will continue to finance development projects, with a focus on efficient spending and maximum economic and social returns.

Domestic mega-projects under Crown Prince Mohammed bin Salman’s diversification drive include the $500bn Neom Red Sea tourism project and the Qiddiya entertainment development.