What it means
Every central bank keeps a stock of foreign assets, and SAMA's is among the largest in the Middle East. The assets are held abroad, in foreign currencies and in securities issued by foreign governments, so that the country can pay for imports and defend its exchange rate when it needs to.
The Saudi riyal is pegged to the US dollar at a fixed rate, which means SAMA must be able to supply dollars on demand to keep the peg credible. A large pool of foreign holdings is what gives investors and importers confidence that it can do so.
When the holdings shrink quickly, markets start asking whether the peg is under pressure. The figure moves with oil.
When oil revenues are strong, dollars flow into the government and then into the central bank's reserves, lifting foreign holdings. When oil prices fall or the government runs large deficits and draws on its reserves, the holdings decline, so the series is often read as a barometer of the kingdom's fiscal health.
For a business reader the number matters in practical ways. Exporters and importers, banks lending in the region and foreign investors all look at it to judge currency risk, sovereign credit quality and the country's ability to ride out a downturn.
SAMA publishes the data in its regular statistical releases, and the exact categories and definitions can change, so always read the notes behind any figure you quote. Foreign holdings are not the same as the government's wider sovereign wealth, which sits in separate funds with different mandates.
They are also only one input to credit analysis, and a big number does not by itself prove a country is safe. It has to be set against import needs, debt and the trend over time.
In practice
Real-world examples.
Example
A commodities trader selling goods into Saudi Arabia reviews the central bank's foreign holdings each quarter. A rising trend reassures the credit committee that dollars will be available to settle invoices.
Example
A global bond fund compares the foreign holdings of several Gulf central banks when deciding how much sovereign debt to buy. The fund prefers the issuer whose holdings cover the largest number of months of imports.
Example
A construction group bidding for a large project in the kingdom checks whether falling oil prices have eroded the reserves. A sharp decline leads it to ask for payment guarantees from a bank rather than relying on government payment terms alone.
Formula
Calculation
There is no single formula for the holdings themselves, but analysts often turn them into import cover, which shows how many months of imports the reserves could pay for.
Import Cover (months) = Foreign Holdings / Average Monthly Imports
The figures below are purely illustrative and are not actual SAMA data. Suppose foreign holdings are $450,000,000,000 and average monthly imports are $15,000,000,000.
Import Cover = $450,000,000,000 / $15,000,000,000 = 30 months
If foreign holdings fell to $300,000,000,000 with imports unchanged, import cover would drop to $300,000,000,000 / $15,000,000,000 = 20 months.Case study
Seen in the real world.
Dunes Capital Partners is an illustrative, fictional investment firm considering a $50,000,000 loan to a Saudi manufacturer. Its risk team tracks the central bank's foreign holdings alongside oil prices and the government budget.
Over the illustrative two-year review the holdings fell by about a quarter as oil prices weakened and the state ran deficits. The team calculated that import cover was still comfortably above 20 months, so the peg looked well supported.
The firm went ahead but wrote a covenant tying later drawdowns to a minimum level of import cover. In this fictional story the structure let it keep lending while giving it a clear trigger to pause if conditions worsened.
Watch out
Common mistakes.
- Assuming SAMA foreign holdings are the same as Saudi sovereign wealth, when much of the state's wealth sits in separate investment funds.
- Reading a single month's figure in isolation, rather than looking at the trend and what drove the change.
- Treating a large balance as a guarantee of safety without comparing it to import needs and government spending.
Questions
People also ask.
Why does the central bank hold foreign assets at all?
It needs a store of hard currency to pay for imports, defend the exchange rate and absorb shocks when export income falls.
Why is the Saudi riyal peg linked to these holdings?
A fixed exchange rate only works if the central bank can sell dollars on demand, and the foreign holdings are the pool it draws on.
Is SAMA still called SAMA?
Yes in everyday use, although the institution is now officially named the Saudi Central Bank, and the old abbreviation is still widely used in reports and data.
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