‘Central Bank Digital Currencies’ can boost Middle East’s financial inclusion: IMF

‘Central Bank Digital Currencies’ can boost Middle East’s financial inclusion: IMF
CBDCs are a form of digital money issued by a central bank, distinct from cryptocurrencies. Shutterstock
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Updated 19 June 2024

‘Central Bank Digital Currencies’ can boost Middle East’s financial inclusion: IMF

‘Central Bank Digital Currencies’ can boost Middle East’s financial inclusion: IMF

RIYADH: Digital currencies are gaining traction in the Middle East and Central Asia, with countries increasingly considering central bank-issued options to enhance financial inclusion, an analysis said. 

In a blog, the International Monetary Fund noted that economies in these regions are also moving toward digital currencies to improve the efficiency of cross-border payments. 

CBDCs are a form of digital money issued by a central bank, distinct from cryptocurrencies. 

The analysis showed that 19 countries in the Middle East and Central Asia are currently in the research stage of developing nationally-issued digital currencies. 

“Bahrain, Georgia, Saudi Arabia, and the UAE have moved to the more advanced ‘proof-of-concept’ stage. Kazakhstan is the most advanced after two pilot programs for the digital tenge,” said IMF. 

Earlier in June, Saudi Arabia joined a China-dominated Central Bank Digital Currency cross-border trial, according to the Bank for International Settlements.

The trial will see the Saudi Central Bank becoming a “full participant” in Project mBridge, a collaboration launched in 2021 between the central banks of China, Hong Kong, Thailand, and the UAE. 

Project mBridge, overseen by BIS, is a multi-CBDC platform developed to support real-time, cross-border payments and foreign exchange transactions. 

On June 2, the Qatar Central Bank announced the completion of the infrastructure development for its CBDC project.  

In a press statement, QCB said that the move aligns with global advancements in digital currency, aiming to enhance Qatar’s financial sector. 

The apex bank noted that it will start testing and developing selected applications of the CBDC for settling large payments with local and international banks. 

As of March, central banks in 134 countries, accounting for 98 percent of the world’s gross domestic product, were in various stages of evaluating the launch of a national digital currency, according to the Atlantic Council.  

The US think tank also revealed that the Bahamas, Jamaica, and Nigeria have already fully launched a CBDC. 

IMF said that adopting a CBDC, however, requires careful consideration. “Countries across these regions, spanning a diverse group of economies stretching from Morocco and Egypt to Pakistan and Kazakhstan, each must weigh their own unique set of circumstances.” 

Cross-border payments 

According to the IMF, CBDCs can potentially enhance the efficiency of cross-border payment services, which is crucial for oil-exporting countries in the Gulf Cooperation Council region, including Saudi Arabia, the UAE, and Qatar, as well as Bahrain, and Kuwait. 

“That’s because cross-border payments tend to have frictions like varying data formats and operating rules across regions and complex compliance checks. CBDCs that address these inefficiencies could significantly cut transaction costs,” said the international financial institution.  

The report added that CBDCs can also promote financial inclusion by fostering competition in the payments market and enabling more direct transactions with less intermediation.  

Moreover, central banks can help keep costs lower as they are not profit-driven like commercial banks. 

“Increased competition in the payments market from a CBDC could also encourage upgrading technology platforms and the efficiency of payment services, helping financial services reach more people,” said IMF.  

Countries in the Caucasus and Central Asia, Middle East and North Africa oil importers, and low-income countries are particularly interested in this potential benefit. 

The IMF further pointed out that designing CBDCs to work offline could promote financial inclusion in areas with unreliable mobile services, such as low-income and conflict-affected regions.  

Additionally, using national digital currencies for cross-border transfers could reduce remittance costs and speed up transfer times. 

Impacts on commercial banks 

The analysis indicated that deposits constitute a significant portion of bank funding in the region, around 83 percent. A CBDC could compete with bank deposits, potentially impacting bank profits and lending, and posing implications for financial stability, the IMF noted. 

However, the report added that financial institutions in the region generally possess adequate capital levels, profit margins, and liquidity buffers, which could mitigate strains on deposits. 

CBDCs could enhance the pass-through into deposit rates by increasing competition among financial institutions, and they could also strengthen the bank lending channel of monetary policy. “However, the impact would likely be country-specific and is difficult to estimate due to limited CBDC uptake so far,” the IMF stated. 

The report emphasized that policymakers play a crucial role in addressing potential risks posed by national digital currencies. It added, “While there are no clear prerequisites for adopting CBDCs, a healthy banking system, a sound legal system, and strong supervisory and regulatory capacity are essential for reducing risks.” 

The IMF suggested that national digital currencies should be carefully calibrated to avoid competition with commercial bank deposits. “Design features are a crucial consideration. Our survey shows that selecting appropriate features for CBDC implementation is a key challenge for regional policymakers,” the report highlighted. 

Introducing national digital currencies will be a long and complex process, and central banks should approach it with care. 

The IMF also urged policymakers to determine if a CBDC serves their country’s objectives and whether the expected benefits outweigh the potential costs and risks to the financial system.  

Saudi Arabia’s annual inflation rate rises to 1.5% in June 2024: GASTAT

Saudi Arabia’s annual inflation rate rises to 1.5% in June 2024: GASTAT
Updated 1 min 48 sec ago

Saudi Arabia’s annual inflation rate rises to 1.5% in June 2024: GASTAT

Saudi Arabia’s annual inflation rate rises to 1.5% in June 2024: GASTAT

RIYADH: Saudi Arabia’s annual inflation rate reached 1.5 percent in June 2024 compared to the same month last year, driven primarily by rising housing costs, according to the latest data. 

The report from the General Authority for Statistics highlighted that the 8.4 percent increase in the prices of housing, water, and electricity, as well as gas, and other fuels significantly contributed to the inflation rate. 

Actual housing rents saw an increase of 10.1 percent, with villa rentals rising by 7.9 percent. This category’s substantial weight in the overall index had a considerable impact on the inflation rate. 

Saudi Arabia’s inflation rate, while influenced by domestic factors such as housing and fuel costs, remains relatively moderate compared to other Gulf Cooperation Council countries, which have faced varying inflationary pressures due to different economic policies and market conditions. 

According to the GASTAT report, food and beverage prices also saw an increase of 1.1 percent, influenced by a 6.5 percent rise in vegetable prices. The prices of restaurants and hotels rose by 2.4 percent, driven by a 9.8 percent increase in accommodation services.  

The education sector witnessed a 1.1 percent increase, mainly due to a 4.1 percent rise in fees for intermediate and secondary education. 

Conversely, the prices of furnishing and home equipment decreased by 3.7 percent, influenced by a 6.0 percent decline in furniture, carpets, and flooring prices.  

Clothing and footwear prices dropped by 3.6 percent, with ready-made clothing prices falling by 6.3 percent.  

Transportation costs also decreased by 2.7 percent, primarily due to a 4.6 percent reduction in vehicle purchase prices. Communication services saw a slight drop of 0.1 percent. 

Monthly inflation 

On a monthly basis, the consumer price index recorded a slight increase of 0.1 percent in June compared to the previous month.  

This monthly increase was mainly influenced by the rise in housing, water, electricity, gas, and other fuels by 0.5 percent, driven by a 0.7 percent increase in actual housing rents and prices. 

The report also noted minor increases in food and beverages with 0.1 percent, restaurants and hotels, and personal goods and services with 0.3 percent each, compared to the previous month.  

Meanwhile, the prices of clothing and footwear decreased by 0.2 percent. Furnishings, household equipment, and maintenance saw a decline of 0.5 percent. Recreation and culture prices dropped by 0.3 percent, while communications also fell by 0.3 percent. Health expenses decreased by 0.1 percent, and tobacco prices went down by 0.2 percent. 

The prices of education and transportation products remained stable. 

Wholesale price index 

In another report, GASTAT revealed that the wholesale price index increased by 3.2 percent in June compared to the same month of the previous year.  

This increase was mainly driven by a 13.4 percent rise in prices of basic chemicals and an 11.9 percent increase in prices of refined petroleum products.  

The category of other transportable goods saw an 8.0 percent increase, significantly impacted by these price rises.  

Prices of food products, beverages, tobacco, and textiles rose by 1.3 percent, with leather, leather products, and footwear prices increasing by 6.6 percent, and grain mills, starch, and other food products rising by 4.6 percent. 

However, on a monthly basis, the WPI decreased by 0.1 percent in June compared to May, attributed to a 0.3 percent decrease in the prices of ores and minerals, food products, beverages, tobacco, and textiles.  

The prices of basic metals decreased by 0.6 percent, while prices of agriculture and fishery products increased by 0.4 percent, driven by a 1.8 percent rise in the prices of live animals and animal products. 

Average prices  

In a separate bulletin from the GASTAT, notable shifts in the average prices of goods and services across Saudi Arabia for June 2024 were revealed.  

The data, which tracks price movements on a monthly basis, highlighted both increases and decreases in various categories, reflecting dynamic market conditions. 

Several goods and services recorded substantial price increases in June compared to May 2024.  

Furnished apartments saw the highest increase at 22.47 percent, followed by hotel accommodation at 20.38 percent, Indian pomegranates at 8 percent, local cucumbers at 7.24 percent, and local fig at 7.23 percent. 

The prices of 99mm, 300mm, and 120mm national electric cables increased by 3.39 percent, 3.37 percent, and 3.10 percent, respectively. 

Conversely, several items experienced significant price drops during the same period. Local melons saw the highest decrease at 16.39 percent, followed by imported onions at 14.15 percent, local onions at 11.52 percent, Lebanese peach at 9.51 percent, and Pakistani mango at 8.79 percent.  

Aluminum slightly decreased by 0.92 percent, 6mm national reinforcing iron by 0.80 percent, coal by 0.10 percent, and 15cm black block by 0.02 percent. 

These reports provide a comprehensive overview of the price movements in Saudi Arabia, reflecting the diverse factors influencing inflation and the cost of living in the Kingdom. The data highlighted the complexity of the economic landscape, with significant variations across different sectors and categories. 

SNB Capital among banks set to lead IPO of Nupco

SNB Capital among banks set to lead IPO of Nupco
Updated 15 July 2024

SNB Capital among banks set to lead IPO of Nupco

SNB Capital among banks set to lead IPO of Nupco

RIYADH: Saudi Arabia's Public Investment Fund has appointed SNB Capital as one of the banks leading on a planned initial public offering of the Kingdom's largest medical procurement firm, Arab News can confirm.

A spokesperson for SNB Capital verified its involvement in the listing process of the National Unified Procurement Co., which could raise up to $1 billion from the sale of a 30 percent stake in the company.

The bank was one of three mentioned in a report by Bloomberg, which also claimed JPMorgan Chase & Co. and Morgan Stanley would be involved in the IPO, although neither of those institutions could be reached by Arab News for a comment.

The deal could come as soon as this year, Bloomberg said.

The IPO reflects investor confidence in Saudi Arabia’s economic reforms and the healthcare sector’s growth potential.

It also underscores the Kingdom’s commitment to attracting foreign investment and promoting private sector participation in its economy.

Founded in 2009, Nupco plays a crucial role in Saudi Arabia's healthcare sector by centralizing procurement and logistics services for medical supplies and pharmaceuticals.

This initiative aligns with the Kingdom’s Vision 2030, which aims to diversify the economy and reduce its dependence on oil revenues.

The IPO of Nupco is part of a broader strategy by the PIF to monetize its assets and invest in various sectors to drive economic growth and development.

The PIF, chaired by Crown Prince Mohammed bin Salman, has been at the forefront of transforming Saudi Arabia’s economic landscape through substantial investments in sectors such as technology, entertainment, and tourism.

Healthcare development is one of the key pillars of Vision 2030 including boosting the pharmaceutical sector.

In June, Saudi healthcare group Dr. Soliman Abdel Kader Fakeeh Hospital Co. raised $763 million in a Riyadh IPO in June, closed at 10 percent above its offering price of SR57.5 ($15.3) in Riyadh.

Oman sees hotel revenue rise 10.2% thanks to European-led tourist surge 

Oman sees hotel revenue rise 10.2% thanks to European-led tourist surge 
Updated 15 July 2024

Oman sees hotel revenue rise 10.2% thanks to European-led tourist surge 

Oman sees hotel revenue rise 10.2% thanks to European-led tourist surge 

RIYADH: European travelers to Oman helped fuel a 10.2 percent rise in hotel revenue in the first five months of 2024, official data has revealed.

Figures from the National Centre for Statistics and Information show that three to five-star facilities in the country pulled in over 108.3 million Omani rials ($281.5 million) over the period, compared to 98.3 million rials in 2023.

Revenue growth was fueled by a 13.7 percent surge in the total number of hotel guests, with 286,980 European visitors — a 19.6 percent increase over the first five months of 2023.

Simultaneously, the hotel occupancy rate rose by 6 percent to reach 51.5 percent, compared to 2023.

Oman’s substantial increase in European visitors and strong local and regional turnout mirrors the broader strategy of diversifying tourist demographics and bolstering the hospitality sector seen across the GCC.

Similar to Oman, Saudi Arabia has topped the UN Tourism’s ranking for the growth of international tourist arrivals in 2023 compared to 2019 among large destinations, achieving an increase of 56 percent over that tiem, according to the World Tourism Barometer report released in January.

The NCSI report provides a detailed breakdown of the nationalities among the hotel guests in Oman during the first five months of 2024.. 

Among them, 306,255 were Omani citizens, reflecting a substantial local turnout with an 11 percent surge.

The number of Gulf Cooperation Council citizens visiting the Sultanate also increased, reaching 58,572 guests, up 6.8 percent comparted to the same period in 2023.

Additional Arab tourists contributed to the growth, with 40,548 travelers, marking a modest but positive 13.2 percent increase.  

Citizens from African countries demonstrated strong interest, with a rise of 1.6 percent, resulting in 4,677 visitors. 

Guests from the US also significantly contributed to the tourism growth, with the number of travelers reaching 28,695.

Additionally, guests from Oceania countries totaled 13,446 visitors.  

In addition, Oman’s airports handled more than 4.9 million passengers and 31,708 flights by the end of April.

Muscat International Airport saw 4.4 million passengers, a 16.8 percent increase, with 4.09 million international and 332,391 domestic passengers.

Indians topped the number of passengers through Muscat International Airport by the end of April, with 89,206 arrivals and 83,855 departures. 

They were followed by Bangladeshi nationals with 12,829 incoming and 20,597 outgoing passengers, and Pakistani nationals with 21,191 arrivals and 19,532 departures.

Sohar Airport served 22,390 passengers on 192 flights, while Duqm Airport carried 20,106 passengers on 208 flights.

Closing Bell: Saudi main index gains 66 points to 11,948 

Closing Bell: Saudi main index gains 66 points to 11,948 
Updated 15 July 2024

Closing Bell: Saudi main index gains 66 points to 11,948 

Closing Bell: Saudi main index gains 66 points to 11,948 

RIYADH: Saudi Arabia’s Tadawul All Share Index continued its upward movement on Monday, as it gained 66.15 points to close at 11,947.70.  

The total trading turnover of the benchmark index was SR7.18 billion ($1.91 billion), with 105 of the listed stocks advancing and 116 declining.  

On the other hand, Saudi Arabia’s parallel market Nomu edged up by 0.60 percent to close Monday’s trading at 25,849.92.  

The MSCI Tadawul Index also gained 9.83 points to 1,497.85.  

The best-performing stock on the main market was Al Sagr Cooperative Insurance Co. The firm’s share price surged by 10 percent to SR20.68.  

Other top performers were National Gas and Industrialization Co. and Aljazira Takaful Taawuni Co., whose share prices soared by 6.01 percent and 5.32 percent, respectively.  

Similarly, the share prices of Makkah Construction and Development Co. and United Cooperative Assurance Co. also increased by 4.77 percent and 3.72 percent, respectively.  

The worst performer of the day was Al Taiseer Group Talco Industrial Co., as its share price dropped by 7.72 percent to SR65.70.  

On the other hand, the positive performance of Nomu on Monday was driven by Future Care Trading Co. and National Building and Marketing Co., whose share prices surged by 10.34 percent and 10 percent, respectively.  

The worst performer on the parallel market was Ladun Investment Co. The firm’s share price slipped by 7.42 percent to SR2.87.  

On the announcements front, Sure Global Tech Co. said it signed a contract worth SR51.99 million to develop a digital platform for the Entrustment and Liquidation Center, also known as Infath.  

In a Tadawul statement, the company said that the three-year contract will have a positive impact on its financials from 2024 through 2026.  

Meanwhile, Naseej for Technology Co. announced that it signed a contract worth SR11.3 million with the National eLearning Center.  

According to a Tadawul statement, the scope of the contract includes managing and operating NELC’s learning management system to enhance confidence in e-learning and lead sustainable innovation in Saudi Arabia.  

The statement added that the contract which is valid for 36 months is expected to positively impact Naseej Tech’s financial performance in 2024, 2025, and 2026. 

Saudi Arabia leads GCC IPO market with $2.1bn raised in first half of 2024: Markaz

Saudi Arabia leads GCC IPO market with $2.1bn raised in first half of 2024: Markaz
Updated 15 July 2024

Saudi Arabia leads GCC IPO market with $2.1bn raised in first half of 2024: Markaz

Saudi Arabia leads GCC IPO market with $2.1bn raised in first half of 2024: Markaz

RIYADH: Saudi Arabia led the Gulf Cooperation Council’s initial public offering market in the first half of 2024, raising $2.1 billion in what was an annual increase of 141 percent, an analysis has revealed.

In its latest report, Kuwait Financial Center, also known as Markaz, noted that the Kingdom saw 19 offerings in the six months to the end of June, accounting for 59 percent of the total IPO proceeds in the GCC region. These included $1.95 billion listed in its main market and $143 million in the parallel market, also known as Nomu. 

Saudi Arabia’s ambitious privatization and diversification efforts across sectors such as healthcare, technology, and renewable energy have significantly broadened the market’s appeal.  

These initiatives offer investors exposure to high-growth industries, positioning the Kingdom as an attractive destination for investment in sectors poised for substantial development and innovation. 

Led by its pivotal Capital Market Authority advancing Vision 2030 goals, the Saudi capital market is on a journey of expanision, and saw net foreign investment reach SR198 billion ($52.79 billion) in 2023 – a 7.7 percent annual increase, according to CMA’s June report. 

Top IPOs 

Among the top five GCC IPOs by proceeds in the first half of this year, the Markaz report noted that Dr. Soliman Abdulkader Fakeeh Hospital Co., listed on Saudi Arabia’s main market, raised $764 million, making it the largest IPO during that period. 

The healthcare firm offered 49.8 million shares, representing a 21 percent stake, and received an oversubscription of 119 times. The IPO proceeds accounted for 21 percent of the total GCC IPO proceeds during the period. 

Alef Education, listed on the Abu Dhabi Securities Exchange, secured the second spot with its IPO raising $515 million in proceeds.  

The company offered 1.4 billion shares, representing a 20 percent stake, which was oversubscribed 39 times.  

According to Markaz, Alef Education’s proceeds constituted 14 percent of the total GCC IPO proceeds during the period. 

Parkin Co., listed on the Dubai Financial Market, raised $429 million, making it the third-largest listing in the GCC region in the first half of this year.  

The parking facility provider offered 750 million shares, equivalent to a 25 percent stake. The IPO proceeds constituted 12 percent of the total GCC IPO proceeds during the period and were oversubscribed 165 times. 

Meanwhile, Spinneys Co., also listed on DFM, raised $375 million in proceeds. The supermarket chain offered 900 million shares, representing a 25 percent stake, and was oversubscribed 64 times.  

Markaz revealed that Spinneys Co.’s proceeds constituted 11 percent of the total GCC IPO. 

Similarly, Modern Mills Co., listed on Saudi Arabia’s main market, raised $314 million through the sale of 24.5 million shares, or a 30 percent stake, and was oversubscribed 127 times.  

Modern Mills Company's IPO constituted 9 percent of the total GCC IPO proceeds. 

GCC IPO market 

The overall GCC region experienced a decline in IPO activity in terms of value, with total proceeds amounting to $3.1 billion from 23 offerings in the first half. This represents a 32 percent decline compared to the same period of the previous year. 

In the UAE, IPO proceeds totaled $1.3 billion in the first six months of this year, marking a year-on-year decrease of 67 percent. Of this amount, DFM hosted $805 million, constituting 23 percent of the total GCC IPO funds in the first half. 

Similarly, ADX recorded $515 million in IPO capital, accounting for 14 percent of the total GCC IPO funds during the period. 

Meanwhile, Kuwait saw IPO funds totaling $147 million during the same period, accounting for 4 percent of the total GCC IPO value and listed on Boursa Kuwait. 

The report revealed that the healthcare sector accounted for nearly 22 percent of the total funds raised during the first half of this year through three offerings, totaling $788 million. 

In contrast, the technology sector raised over $515 million during the same period, constituting 14 percent of the total GCC IPO proceeds. 

Similarly, new listings from the industrial sector constituted 12 percent of the region’s total funds, followed by the consumer staples industry and the food and beverages sector at 11 percent and 9 percent, respectively. 

Additionally, the commercial and professional services industry contributed 8 percent to the region’s total IPO funds, closely followed by the insurance sector at 6 percent. 

Middle East IPOs  

Overall, IPOs in the Middle East are set for continued positive aftermarket performance this year, following significant gains in the first quarter, as reported by PwC in May. 

It also highlighted that the Saudi Stock Exchange has emerged as a dominant force in the GCC equity market. 

In the same month, Mohammed Al-Rumaih, CEO of the Saudi Exchange, noted that the introduction of ‘Market Making’ and the debut of ‘Single Stock Options’ have enhanced Tadawul's appeal among international investors. 

Earlier this month, another report released by CMA noted that 42 companies listed in Saudi Arabia’s benchmark index and parallel market benefitted from the nominal value split mechanism in 2023.  

This followed the CMA’s execution of the Companies Law and its Executive Regulations on Jan. 19, 2023, permitting listed firms to split stock par values from SR10 to various lower options. 

Under this mechanism, a company divides its existing shares into multiples to enhance trading volume and accessibility for investors, without altering its total market capitalization.