AFP/Riyadh

Opec powerhouse Saudi Arabia is pumping money from its huge $400bn stockpile of reserves into the economy to keep up growth, economists and bankers in Riyadh said.

A decline in net reserves over the last three months suggests that the world’s biggest oil exporter is using the money to keep up liquidity in Saudi banks and possibly shore up government investment spending too, they said.

The Saudi Arabian Monetary Agency released data on Saturday showing a nearly 2% decline in reserves in February to SR1.585tn ($422.6bn), from January.

Reserves peaked at $443.2bn last November following a year of skyrocketing oil prices, which rose to $147 in July.

Sfakianakis said the government is injecting more funds into the banking sector to stimulate lending, which slowed late last year as Saudi banks began to feel the impact of the global crisis.

But the government could also be using the reserves to fund its budget because of a slowdown in oil receipts due to lower crude prices over the past four months, according to Gamble.

Government spending on major infrastructure, education and health sector projects – projected at some $400bn over the next five years – is crucial in driving the economy.

Private investment flows from abroad have slowed and domestic consumers have pared back their shopping, made nervous by the global downturn.

The plunge of oil prices from a peak of $147 a barrel in July to a low of around $30 near 2008-end led to the government budgeting a SR65bn ($17bn) deficit for 2009, out of SR475bn ($127bn) in total spending.