Saudi Arabia holds one of the world’s largest foreign exchange reserves, second only to China. As of August 2023, Saudi Arabia’s foreign currency reserves stood at over $450 billion. This massive pool of reserves gives the Kingdom tremendous economic clout and has helped insulate it from oil price shocks.


Saudi Arabia’s vast foreign exchange reserves are a result of the country’s standing as the largest oil exporter in the world. For decades, high oil revenues allowed the Saudi government to stockpile hard currency assets. However, in recent years, low oil prices have strained Saudi finances and drawn down on reserves. Despite this, the Kingdom’s reserves remain formidable and still provide an important buffer.

Let’s take a closer look at the composition, management, and importance of Saudi Arabia’s reserves, including:

  • Background on reserve accumulation
  • Current size and makeup of reserves
  • SAMA’s reserve management
  • Benefits for economic and currency stability
  • Likely future trajectory

Proper insight into Saudi Arabia’s reserves provides useful context on the country’s economic strength.

Background on Saudi Reserve Accumulation

Saudi Arabia began accumulating significant foreign exchange reserves in the 1970s, following the first global oil crisis. As Saudi oil revenues boomed, the Kingdom channeled surplus petrodollars into reserves. This provided funds to finance development and future deficits.

In the years after the oil shocks of 1973 and 1979, Saudi reserves grew enormously. By 1981, they had reached over $120 billion. The Kingdom’s reserve stash expanded to $150 billion by 1985. This represented an incredible war chest that boosted Saudi influence in global finance.

Vehicles for Reserve Buildup

In the early years, Saudi Arabia relied heavily on foreign deposits to build its reserves. The Saudi Arabian Monetary Agency (SAMA) placed huge sums in external accounts at major US and European banks.

However, much changed after the 1982 Mexican debt crisis. Fearful of default risks, Saudi Arabia repatriated some foreign deposits and began acquiring safer reserve assets. These included:

  • US Treasury Securities – Holdings of US government bonds grew enormously and became the main reserve asset.
  • External bonds – Saudi Arabia invested in highly rated corporate and sovereign bonds for diversification.
  • Gold – Gold reserves were expanded as another safe haven asset.
  • Bank reserves – SAMA held mandatory cash reserves abroad to support the riyal peg.

Post-1982 Approach

After the early 1980s, Saudi Arabia formalized a more conservative approach to reserve management. The Kingdom emphasized liquidity and capital preservation over returns.

Safe asset accumulation focused on financing imports and providing a buffer against oil volatility. This remains Saudi Arabia’s overall reserve philosophy today.

Current Size and Composition of Reserves

Saudi Arabia’s reserves peaked at over $730 billion in mid-2014, due to high oil prices. The fall in oil since then has pushed reserves down significantly as the government drew on them to fund deficits.

However, reserves remain very large. As of August 2023, total foreign currency reserves stood at $450.9 billion according to SAMA data.

The US dollar remains the dominant currency held. But the euro, British pound, Chinese yuan and others provide diversification.

Main Reserve Composition

  • Securities – The bulk of reserves are held in safe, liquid securities like US Treasuries. Likely over 70% of reserves.
  • Deposits/cash – Reserves also held at central banks like the US Federal Reserve. Provides immediate liquidity.
  • Sovereign bonds – Bonds from G7 countries like Germany help diversify currency exposure.
  • Gold – Saudi Arabia holds around 320 tonnes of gold bullion in reserves.
  • IMF reserve position – Special Drawing Rights (SDRs) from the IMF offer useful liquidity.
  • Other assets – May include corporate bonds, equities, and currency derivatives. Details not fully disclosed.

This makeup provides stability and sound risk management overall. The asset mix may evolve with global markets, but prudence remains key.

SAMA’s Management of Reserves

Saudi Arabia’s central bank, SAMA, manages the Kingdom’s sizable reserves professionally. Some key aspects of their strategy include:

Conservative Asset Allocation

SAMA maintains a heavy allocation to ultra-safe securities like US Treasuries. This limits default risk. Solid credit quality is the priority, even if it sacrifices returns.


SAMA spreads reserves across multiple currencies and asset classes. This avoids over-concentration in any single currency or security.

Short Duration

The maturity profile of securities is kept relatively short. This ensures adequate liquidity to draw on reserves when needed.

Some Outsourcing

SAMA may delegate some active management to external fund managers. However, overall oversight remains strict to limit risks.

Opaque Disclosures

SAMA provides limited data on reserve composition and management. Secrecy helps avoid speculation and distraction. But it hinders external analysis.

So far, this conservative framework has served Saudi Arabia well. But as global markets evolve, SAMA may need to gradually adapt its reserve strategy.

Economic and Currency Benefits

Saudi Arabia’s sizable reserves confer major advantages for its economy and currency. Let’s look at some of the key benefits.

Oil Price Buffering

The chief purpose of Saudi reserves is to cushion oil revenue volatility. When oil prices fall, reserves provide financing to avoid economic shocks. Their counter-cyclical buffer has been vital.

Currency Confidence

Large reserves also back the Saudi riyal’s dollar peg. Reserves cover over 30 months of imports, instilling confidence in the peg’s stability. This provides crucial currency stability.

Sovereign Creditworthiness

Reserves also support Saudi Arabia’s sovereign credit rating. They demonstrate repayment capacity and external resilience. This provides favorable access to international debt markets.

Global Influence

The sheer size of Saudi reserves translates into financial clout globally. It boosts the Kingdom’s voice in institutions like the IMF. Reserves also allow favorable lending terms to regional allies.

Clearly, reserves provide the Kingdom major economic benefits across multiple fronts. Their strategic importance is difficult to overstate.

Future Outlook for Saudi Reserves

Despite recent declines, Saudi Arabia seems likely to maintain sizable reserves for years to come. However, reserves may stabilize at lower levels long-term.

Ongoing Fiscal Deficits

With Saudi Arabia still running budget deficits, reserves will remain under modest pressure. However, deficit reduction should slow drawdowns. Debt markets can increasingly finance deficits.

Continued Oil Income

While oil demand may eventually peak, Saudi Arabia’s low production costs mean oil income will continue long-term. Surpluses in high-price years can replenish reserves.

Reform Dividends

Financial reforms and economic diversification should also bolster non-oil growth. This will take pressure off reserves and may allow gradual restocking.

Geopolitical Motives

Saudi Arabia also has strategic motives to keep sizable reserves. Their economic and deterrent value will remain relevant long-term.

So while Saudi reserves may not return to peak levels again, they still seem poised to stay high by global standards. SAMA will likely maintain reserves over $400 billion for years barring major shocks.


In conclusion, Saudi Arabia’s massive foreign currency reserves remain an influential economic tool. Accumulated from decades of oil surpluses, they provide vital support for the economy and currency.

Careful management by SAMA ensures liquidity and stability in the reserves. And despite some depletion recently, reserves still buffer the economy from oil volatility. With prudent policies, reserves should remain large for the foreseeable future. Their judicious use will be key as Saudi Arabia navigates economic transitions in the years ahead.

But the eventual long-term path for reserves will depend closely on oil markets and the Kingdom’s success in reforming its economy. Regardless, reserves will continue granting Saudi policymakers crucial breathing room. Their stockpile remains the envy of nations dependent on imports or external finance.