Photographer: Sarah Pabst / Bloomberg
Photographer: Sarah Pabst / Bloomberg
Saudi Arabia has replaced its central bank governor and said it would double the size of its sovereign wealth fund by 2025, in a series of announcements made late in the night ahead of the Crown Prince’s iconic investment conference.
Ahmed Alkholifey was removed from his position as head of the monetary authority. He is being replaced by Fahad Al-Mubarak, who was governor of the central bank from 2011 to 2016. The reason for the change was not provided.
Al-Mubarak was the latest minister of state and served as the kingdom’s serpent during his presidency last year at meetings of the Group of 20 industrialized economies. He was also president of the Morgan Stanley unit in Saudi Arabia. Alkholifey was simultaneously appointed adviser to the royal court.
The central bank and the sovereign wealth fund will play an increasingly important role in fueling the domestic recovery as the government seeks to stimulate an economy affected by the twin shocks of the coronavirus pandemic and low oil prices. The mandate of the central bank was recently extended to include supporting economic growth, while the Crown Prince said the wealth fund will invest $ 40 billion a year domestically.
What Bloomberg Economics says …
“As the governor of a central bank with a fixed currency, the role is not the classic one of setting interest rates. The importance of the position lies in being the depository of the country’s foreign exchange reserves. ”
– Ziad Daoud, chief economist of emerging markets
Saudi Arabia ties its currency to the dollar and tends to keep pace with the US Federal Reserve. The change of leadership is unlikely to affect central bank policy, with most of the kingdom’s decision-making levers being controlled by Crown Prince Mohammed Bin Salman.
Saudi Arabia’s central bank has already been one of the key means of boosting the economy, as the coronavirus pandemic and low oil prices affect the private sector. The monetary authority has extended more than 100 billion reais ($ 27 billion) to local banks in liquidity injections and to cover the costs of loan deferrals for small businesses affected by the pandemic.
Lead role
The central bank also controls the kingdom’s reserves, which are among the largest in the world, with 1.7 trillion rials. But his historic role as administrator of the country’s economies is overshadowed by the Public Investment Fund, Saudi Arabia’s $ 400 billion sovereign wealth fund chaired by the Crown Prince.
PIF, as the fund is known, received a $ 40 billion transfer from the central bank in March for new investments as it sought to capitalize on a decline in global markets caused by the coronavirus pandemic. He later revealed that he spent about $ 10 billion buying stakes in Western firms, which he sold a few months later as markets recovered.
In a separate announcement on Sunday, Prince Mohammed said the sovereign wealth fund aims to manage 4 trillion rials by 2025, making it one of the largest government-controlled investors in the world.
If PIF achieves this goal, it would overshadow the current size of China Investment Corp. and it would be similar to Norway’s giant sovereign wealth fund.
Since it unveiled plans in 2016 to turn the fund into one of the cornerstones of a program to reshape the Saudi economy, it is already more than tripled in size.
Under the leadership of Yasir Al-Rumayyan, a close adviser to the Crown Prince, the fund moved investment priorities from stakes in state-owned companies to stake stakes in Uber Technologies Inc. and Jio Platforms Ltd., the digital services company controlled by Indian billionaire Mukesh Ambani.
PIF he resigned from some of his leadership positions last month as he prepared to play a bigger role in the local economy.
Investment showcase
The wealth fund will host the annual investor conference in a few days, with the global pandemic turning most procedures into virtual ones. Since its launch in 2017, the Future Investment Initiative has hosted hundreds of corporate titans, including Jamie Dimon of JPMorgan Chase and Co. and Masayoshi Son of Softbank. The event helped to establish the fund’s reputation as a major source of international investment.
Over the next five years, the PIF strategy seems to be heading home. Prince Mohammed reiterated his commitment that the fund will pump 150 billion reais or more into the local economy each year and added that it will create 1.8 million jobs directly and indirectly by 2025 – a sign of unrest. on the 15% unemployment rate Saudi citizens.
“With the assistance of Matthew Martin.”
(An earlier version of this story corrected the currency conversion in the fourth paragraph.)