Changes to SAMA not to affect core functions; clear mechanism for surplus distribution: Al-Jadaan

Minister of Finance Mohammed Al-Jadaan

The new adjustments to the Saudi Central Bank (SAMA) will not affect its core obligations, including sustaining adequate reserves to protect the riyal-dollar peg and monetary stability, in addition to regulating and supporting the monetary sector, Financial Times reported, citing Minister of Finance Mohammed Al-Jadaan.

Al-Jadaan clarified that the adjustments to SAMA have been designed to modernize the laws, deliver it into line with worldwide requirements and supply the establishment with larger independence, as a result of a few of its obligations, similar to issuing bank licenses, have been dealt with by the Ministry of Finance.

Saudi Arabia has a clear proposal of how the surpluses are distributed, which includes rebuilding buffers with SAMA, rebalancing debts if needed, and distribution between the National Development Fund (NDF) and the Public Investment Fund (PIF), the minister said, providing a greater clarity about the government’s financial position.

“What you will see is we are becoming wiser than putting $70 billion in a bank account that generates very limited returns. We need to balance what you need as cash, what is highly liquid and what you need for the long term, as it will go to the NDF and PIF,” Al-Jadaan said.

He further added that it could not be the “norm” for the PIF to obtain transfers from SAMA’s reserves. “The PIF has adequate funding and would get extra financing from privatizations and any additional itemizing of Saudi Aramco.”

Describing the PIF as the federal government’s “asset manager”, Al-Jadaan said: “If you need more return, you need more risk, but it has to be a calculated risk.

The minister highlighted that Saudi Arabia is shifting in the direction of an extra consolidated strategy to managing its assets and belongings. “We are working on the asset liability management program where we can show what is the government position — liquid assets, illiquid assets, investments and liabilities,” Al-Jadaan noted.

According to data compiled by Argaam, in November 2020, the Saudi Cabinet approved the Saudi central bank law and changing the name of the Saudi Arabian Monetary Authority (SAMA) to the ‘Saudi Central Bank’.

SAMA will be linked directly to the Custodian of Two Holy Mosques, King Salman Bin Abdulaziz Al Saud, while enjoying its financial and administrative independence, in line with the global practices of central banks