Saudi billionaire Prince Alwaleed Bin Talal
Saudi Arabia should create a sovereign wealth fund to help shield the nation from falling oil prices and help reduce reliance on oil, Saudi Arabia’s billionaire Prince Alwaleed Bin Talal urged on Tuesday, according to both Reuters and CNBC.
“What I’m asking for now in this open forum is to have an active sovereign wealth fund, and to put in it all the excess foreign exchange that you have, all the money you have…” Prince Alwaleed told reporters in the Saudi port city of Jeddah.
“The budget of the kingdom of Saudi Arabia depends 90% on oil … I’ve already said that this is a huge mistake,” the Prince said.
The OPEC nation of Saudi does not have a sovereign wealth fund in the form of many of its oil-rich Gulf neighbors. The nation’s surplus earnings are invested by SAMA Foreign Holdings, which is an entity that is controlled by the nation’s Central Bank, the Saudi Arabian Monetary Agency.
Over the years of high oil prices, Saudi’s Central Bank has built up immense foreign reserves, with net foreign assets totaling 2.76 trillion riyals ($736 billion) as of September. The Central Bank is believed to have invested over half of its foreign reserves in conservative, low-return U.S. dollar assets like U.S. Treasury bonds and bank deposits.
“The Norway fund is our role model because they have around over $850 billion sovereign fund and they make out of this around $40 billion to $50 billion. And that amount covers almost all the requirements of the budget in Norway,” the Prince said.
“Clearly the income from our sovereign wealth fund would not cover all our budget, but at least should cover a good size of it,” the Prince added.
The comments from Prince Alwaleed follow a rare public dispute over oil policy last month in which he sent an open letter to the Saudi government criticizing a complacent reaction to falling oil prices by the nation’s Oil Minister.
Sources: Reuters, CNBC, WSJ
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