Saudi Arabia is gathering foreign assets while no one is watching.
The Kingdom’s net foreign assets totaled 1.7 trillion riyals ($453 billion) in January, the highest level since 2022. Most of it is due to oil, of course. But it’s also thanks to a different financing strategy — bond issuance.
Riyadh may be accumulating wealth, but it’s doing it while piling up debt.
Saudi Arabia’s latest reserve data signals a notable strengthening of the kingdom’s external position, even as domestic fiscal and banking pressures build beneath the surface. Its foreign assets rose to $453 billion in January. While oil remains the main driver, Riyadh has been building a buffer reserve by issuing Eurobonds.
As the world’s largest crude exporter, Saudi Arabia’s external accounts are deeply sensitive to energy prices and export volumes. When oil revenues rise, dollar inflows accumulate at the central bank, strengthening reserves and providing a buffer against shocks. Thankfully, for the Kingdom an almost 30% annual increase in foreign currency has boded well so far.
Yet oil alone doesn’t explain the reserve rise. Increased foreign borrowing is fattening Saudi’s reserve growth. When the government issues debt internationally, it receives hard currency inflows that initially swell reserves. But the wise know that that’s more balance sheet expansion, rather than wealth accumulation. In effect, the kingdom is simultaneously accumulating foreign assets while increasing foreign liabilities.
This is a departure from how Saudi Arabia usually operates, which is funding budget deficits with oil reserves. During the oil-price slump after 2014 — when reserves peaked at 2.8 trillion riyals ($747 billion) before entering a prolonged drawdown — Saudi Arabia used its reserves to finance budget deficits and defend the riyal’s dollar peg. The current rebuild suggests Riyadh is prioritizing buffer accumulation again, but this time using a different strategy. Rather than depleting reserves to fund deficits, Saudi Arabia has opted to borrow externally at competitive rates, preserving sovereign assets while smoothing fiscal cycles.
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But the key question here is: can oil revenues and non-oil growth eventually narrow fiscal deficits enough to reduce reliance on borrowing?
Rising reserves funded partly by debt issuance are not purely a function of export strength; they represent a balance-sheet expansion. Assets rise, but so do liabilities. And Riyadh already has plenty of it.
