Photographer: Sarah Pabst / Bloomberg
Photographer: Sarah Pabst / Bloomberg
Saudi Arabia replaced the governor of the central bank and said it would more than double the size of its sovereign wealth fund by 2025 in a series of late-night announcements ahead of the crown prince’s main investment conference.
Ahmed Alkholifey was removed from his position as head of the monetary authority. He will be replaced by Fahad Al-Mubarak, who was governor of the central bank from 2011 to 2016. The reason for the change was not specified.
Al-Mubarak had last been a minister of state, serving as the kingdom’s sherpa during last year’s presidency of meetings of the Group of 20 Industrialized Economies. He was also previously chairman of Morgan Stanley’s Saudi Arabia unit. Alkholifey was simultaneously appointed an adviser to the royal court.
The central bank and sovereign fund will play an increasingly important role in boosting the domestic recovery as the government seeks to stimulate an economy hit by the double shocks of the coronavirus pandemic and low oil prices. The central bank’s mandate was recently expanded to support economic growth, while the crown prince has said the equity fund would invest $ 40 billion a year domestically.
What Bloomberg Economics Says …
As the governor of a pegged currency central bank, setting interest rates is not the classic role. The importance of the post is that it is the custodian of the country’s foreign exchange reserves. “
– Ziad Daoud, chief emerging markets economist
Saudi Arabia pegs its currency to the dollar and tends to be in step with the US Federal Reserve. The change in leadership is unlikely to affect central bank policies, as most of the decision-making levers in the kingdom are controlled by Crown Prince Mohammed Bin Salman.
The Central Bank of Saudi Arabia has already been one of the main tools to stimulate the economy as the coronavirus pandemic and low oil prices hamper the private sector. The monetary authority has provided more than 100 billion riyals ($ 27 billion) to local banks through liquidity injections and to cover the costs of deferring loans for small businesses affected by the pandemic.
Main role
The central bank also manages the kingdom’s reserves, which are among the largest in the world at 1.7 trillion rial. But his historic role as manager of the country’s savings is eclipsed by the public investment fund, Saudi Arabia’s $ 400 billion state investment fund chaired by the Crown Prince.
The PIF, as the fund is called, received a $ 40 billion transfer from the central bank for new investment in March as it sought to capitalize on a slump in global markets following the start of the coronavirus pandemic. It later revealed that it had spent about $ 10 billion buying shares in western blue-chip companies, which it sold a few months later when the markets recovered.
In a separate announcement on Sunday, Prince Mohammed said the sovereign wealth fund aims to manage 4 trillion riyals by 2025, making it one of the largest government-controlled investors in the world.
If the PIF achieves that goal, it would be China Investment Corp. overshadow and be comparable to Norway’s gigantic sovereign fund.
Since unveiling plans in 2016 to transform the fund into one of the cornerstones of a program to reform the Saudi economy, the fund has more than tripled.
Under the leadership of Yasir Al-Rumayyan, a close advisor to the Crown Prince, the fund has shifted investment priorities from stakes in state-owned companies to building stakes in Uber Technologies Inc. and Jio Platforms Ltd. by Indian billionaire Mukesh Ambani.
The PIF last month revised some of its leading top positions as it prepared to play a greater role in the local economy.
Investment showcase
The equity fund will host its annual investor conference within days, with the global pandemic making most of the work virtual. Since its launch in 2017, the Future Investment Initiative has hosted hundreds of corporate titans, including JPMorgan’s Jamie Dimon and Co. and Masayoshi Son from Softbank. The event helped establish the fund’s reputation as a major source of international investment.
The PIF’s strategy appears to be heading home for the next five years. Prince Mohammed reiterated the promise that the fund would pump 150 billion riyals or more into the local economy each year, adding that it would directly and indirectly create 1.8 million jobs by 2025 – a nod to concerns surrounding the unemployment rate of 15% among Saudi citizens.
– With help from Matthew Martin
(An earlier version of this story corrected currency conversion in the fourth paragraph.)