Thread by @Brad_Setser

Saudi Arabia's q3 current account numbers are out, and they -- unsurprisingly -- showed an ongoing deficit.

My rough estimate for Saudi Arabia's current account break even (the oil price that results in external balance) continues to be over $90 a barrel

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A reminder -- the external break even is calculating using reported oil export revenues, the non-oil current account, and net exports (my numbers there are dependent on getting regular updates from @Rory_Johnston )

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@Rory_Johnston i.e. Saudi Arabia needs $250 billion a year in export receipts from oil to balance its current account -- and that is much more than it gets with oil at ~ $60 a barrel

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@Rory_Johnston There isn't yet any evidence that the Saudis (or MBS) are adjusting to current oil realities ... though the pace of external spending is growing a bit more slowly. The Saudis also continue to accumulate external assets even with a $40b current account deficit ...

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@Rory_Johnston That is possible, of course, because the Saudis (the government, the PIF, Aramco ... ) are big borrowers -- placing bonds externally, taking out new bank loans, and so on ... external debt is poised to top reserves by end the of q4

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@Rory_Johnston External borrowing from the market was over $70b over the last 4qs -- not a small sum

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@Rory_Johnston To be sure, the Saudis have substantial non-reserve foreign assets; their aggregate external position is still solid ...

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@Rory_Johnston But with a fiscal break even of ~ $100, a similar balance of payments break even, and rising external debt relative to reserves, I really don't understand why S&P upgraded Saudi Arabia last year ... its credit quality is getting worse not better

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spglobal.com/ratings/en/reg…

@Rory_Johnston I have given @IMFNews a hard time for ignoring balance of payments variables in their analysis of China (until recently) and in their market access debt sustainability analysis. But a lack of fluency in the balance of payments is now a more general problem

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