Photographer: Sarah Pabst / Bloomberg
Photographer: Sarah Pabst / Bloomberg
Saudi Arabia replaced its central bank governor and said it would double the size of its sovereign wealth fund in 2025 in a series of announcements the night before the Crown Prince’s flagship investment conference.
Ahmed Alkholifey was removed from his position at the head of the monetary authority. He is 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 had recently been minister of state and was the kingdom’s sherpa during his presidency last year of the group meetings of the 20 industrialized economies. Previously, he was also president of Morgan Stanley’s Saudi Arabia unit. Alkholifey was simultaneously appointed adviser to the royal court.
The central bank and sovereign wealth fund will play an increasingly important role in fueling the internal recovery, as the government seeks to boost an economy affected by the twin shocks of the coronavirus pandemic and low oil prices. The mandate of the central bank was recently was expanded to include support for economic growth, while the Crown Prince has said the wealth fund would invest $ 40 billion a year nationally.
What Bloomberg Economics says …
“As governor of a central bank with a fixed currency, the role is not the classic one of setting interest rates. The importance of the place lies in being the custodian of the country’s foreign exchange reserves.”
– Ziad Daoud, chief economist of emerging markets
Saudi Arabia sets its currency against the dollar and tends to move parallel to the US Federal Reserve. The change of leadership is unlikely to affect central bank policy, with most decision-making levers in the kingdom controlled by Crown Prince Mohammed Bin Salman.
The central bank of Saudi Arabia has already been one of the key vehicles for providing stimulus to the economy, as the coronavirus pandemic and low oil prices hamper the private sector. The monetary authority has extended more than Rs 100 billion ($ 27 billion) to local banks in liquidity injections and to cover the costs of loan deferrals for small businesses affected by the pandemic.
Main 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 the country’s savings manager is overshadowed by the Public Investment Fund, Saudi Arabia’s $ 400 billion sovereign wealth fund presided over by the Crown Prince.
The PIF, as the fund is known, received a $ 40 billion transfer from the central bank in March for new investments as it appeared to capitalize on the fall in world markets caused by the outbreak of the coronavirus pandemic. He later revealed that he had spent about $ 10 billion buying shares in blue Western companies, 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 the PIF achieves this goal, it would overshadow the current size of China Investment Corp and be similar to Norway’s sovereign wealth giant.
Since the 2016 plans to transform the fund into one of the key pillars of a program to reshape the Saudi economy were unveiled, it has already tripled in size.
Under the direction of Yasir Al-Rumayyan, a close adviser to the Crown Prince, the fund has changed the investment priorities of stakes in state-owned enterprises to the stakes of Uber Technologies Inc. and Jio Platforms Ltd., the digital services business controlled by Indian billionaire Mukesh Ambani.
The PIF it rejected some of its top leadership positions last month as it set out to play a more important role in the local economy.
Investment showcase
The wealth fund will host its annual investor conference in a few days, with the global pandemic that will make most of the paperwork virtual. Since its launch in 2017, the Future Investment Initiative has hosted hundreds of corporate titans, including JPMorgan Chase and Co.’s Jamie Dimon. and Masayoshi Son of Softbank. The event has helped establish the fund’s reputation as a major source of international investment.
Over the next five years, the PIF’s strategy looks set to move home. Prince Mohammed reiterated the promise that the fund would pump 150 billion reais or more into the local economy each year, adding that it would create 1.8 million jobs directly and indirectly by 2025, a gesture of anxiety. around the unemployment rate of 15% Saudi citizens.
– With the assistance of Matthew Martin
(An earlier version of this story corrected the currency conversion in the fourth paragraph.)