Photographer: Sarah Pabst / Bloomberg
Photographer: Sarah Pabst / Bloomberg
Saudi Arabia has replaced the central bank president and said it would more than double the size of its sovereign wealth fund by 2025 in a series of nightly announcements ahead of the Crown Prince’s investment conference.
Ahmed Alkholifey was removed from his position at the head of the monetary authority. He is being replaced by Fahad Al-Mubarak, who was governor of the central bank from 2011 to 2016. The reason for the change was not informed.
Al-Mubarak had recently been a minister of state and served as the kingdom’s sherpa during his presidency last year at meetings of the Group of 20 industrialized economies. He was also chairman of Morgan Stanley’s Saudi Arabia unit. Alkholifey was simultaneously appointed adviser to the royal court.
The central bank and the sovereign wealth fund are expected to play an increasingly important role in driving domestic recovery, while the government seeks to boost an economy hit by the twin shocks of the coronavirus pandemic and low oil prices. The central bank’s mandate was recently expanded to include support for economic growth, while the Crown Prince said the wealth fund would invest $ 40 billion a year domestically.
What the Bloomberg economy says …
“As governor of a central bank with pegged currency, paper is not the classic of fixing interest rates. The importance of the position is to be the guardian of the country’s foreign exchange reserves ”.
– Ziad Daoud, chief economist for emerging markets
Saudi Arabia pegs its currency to the dollar and tends to move in sync with the US Federal Reserve. The change in leadership is unlikely to affect central bank policy, with most of the decision-making levers in the kingdom controlled by Crown Prince Mohammed Bin Salman.
Saudi Arabia’s central bank was once a major vehicle for stimulating the economy, as the coronavirus pandemic and low oil prices hurt the private sector. The monetary authority extended more than 100 billion rials ($ 27 billion) to local banks in injections of liquidity and to cover the costs of postponing loans to small businesses hit by the pandemic.
Main role
The central bank also controls the kingdom’s reserves, which are among the largest in the world, with 1.7 trillion rials. But his historic role as the country’s savings manager is being eclipsed by the Public Investment Fund, Saudi Arabia’s $ 400 billion sovereign wealth fund chaired by the Crown Prince.
The PIF, as the fund is known, received a $ 40 billion transfer from the central bank in March for new investments, while seeking to capitalize on a fall in global markets caused by the onset of the coronavirus pandemic. She later revealed that she spent about $ 10 billion buying stakes in large Western companies, which she sold a few months later as markets recovered.
In a separate announcement on Sunday, Prince Mohammed said the sovereign wealth fund plans 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 will eclipse the current size of China Investment Corp. and it will be similar to Norway’s gigantic sovereign wealth fund.
Since it released plans in 2016 to turn the fund into one of the pillars of a program to reshape the Saudi economy, it has more than tripled in size.
Under the leadership of Yasir Al-Rumayyan, an adviser close to the Crown Prince, the fund shifted investment priorities from state-owned companies to building stakes in Uber Technologies Inc. and Jio Platforms Ltd., a controlled digital services company by Indian billionaire Mukesh Ambani.
The PIF he regained some of his leadership positions last month, as he prepared to play a more important role in the local economy.
Investment showcase
The endowment fund will host its annual investor conference in a few days, with the global pandemic making most procedures virtual. Since its launch in 2017, the Future Investment Initiative has hosted hundreds of corporate titans, including JPMorgan Chase and Jamie Dimon of Co. and Masayoshi Son of Softbank. The event helped establish the fund’s reputation as an important source of international investment.
In the next five years, the PIF strategy looks set to move home. Prince Mohammed reiterated the promise that the fund would inject 150 billion rials or more into the local economy each year, and added that it would create 1.8 million jobs directly and indirectly by 2025 – a nod to anxiety about the employment rate. 15% unemployment among Saudi citizens.
– With the help of Matthew Martin
(An earlier version of this story corrected the currency conversion in the fourth paragraph.)