Saudi Arabia's central bank governor said on Sunday the world's top oil exporter was drawing on some foreign reserves but not selling foreign assets to finance a growing budget designed to stimulate the economy.

Saudi Arabia, which pegs its currency to the dollar and is a major holder of US Treasuries, would still witness good growth this year in non-oil sectors even as oil production contracts, Muhammad Al-Jasser told reporters.

'No we are not,' Al Jasser said in the Saudi capital, Riyadh, when asked if the central bank was selling foreign assets.

When asked to elaborate on the recent decline in the central bank's foreign assets shown in the Saudi Arabian Monetary Agency's monthly bulletins, he said the oil producer was drawing on some foreign reserves to finance its budget.

In March, the central bank's deposits with banks abroad fell 10.7 percent compared with the month earlier, while there was a 0.68 percent month-on-month decline in its investments in foreign securities.

'Our spending continues to be very robust. That's what we accumulate foreign reserves for,' Al Jasser said.

'We are accumulating them for the rainy days. We need to keep our economy going on all engines. In order to do that you have to use some of your reserves.'    

The kingdom said late last year it would invest $400 billion in the next five years, mainly to enhance infrastructure in the country of 26 million people.

Al Jasser declined to specify whether the Saudi economy was likely to contract this year as Opec oil producers slash output during a global recession.

The IMF last week said Saudi Arabia, the UAE and Kuwait -- the three biggest Gulf economies -- faced contractions this year.

 'The decline of oil prices and the demand for oil has had a large impact on all oil-exporting countries but growth of the non-oil sector will hopefully be good in 2009,' Al Jasser said. - Reuters