During the early 1980s, current account surpluses led to a sharp increase in foreign asset holdings (see table 11, Appendix). As a result, the capital account was dominated by outflows from both official institutions and the private sector. With the current account registering sizable deficits after 1983, the capital account has seen a reversal of these trends. A reduction of foreign assets was followed by a significant inflow of banking sector capital for the purchase of Saudi development bonds. The private sector only began repatriating capital after the Persian Gulf War ended. For much of the 1980s, private individuals and companies placed a substantial amount of funds overseas, a process that accelerated following the fall in oil prices in 1986 and as a result of the Iran-Iraq War. Increased confidence in the Saudi economy after the Persian Gulf War caused the return of these funds. The inflow of private capital in 1991 allowed SAMA to stabilize official foreign exchange holdings and spurred economic activity in the nonoil sector. Official asset flows constituted the bulk of current account financing, a process that became unsustainable following the massive depletions to pay for the Persian Gulf War costs. As a result, the government has engaged in significant commercial borrowing on the international markets and instructed some of its public enterprises (notably Saudi Aramco and Sabic) to do the same. With the expectation that Saudi Arabia will continue to run current account deficits during the foreseeable future, it is likely that the capital account will be dominated by debt flows and a good measure of private sector asset repatriation.

Data as of December 1992