JEDDAH: Saudi Arabia’s domestic liquidity has crossed SR1 trillion-mark, the Saudi Arabian Monetary Agency (SAMA) said in an announcement. “This growth in liquidity is the result of steps taken by SAMA since October until April 14,” SAMA said.
SAMA, which is the Kingdom’s central bank, said the new measures were taken to strengthen commercial banks to provide loans that play a significant role in stimulating economic growth.
“The measures adopted by SAMA led to liquidity enhancement that would encourage banks to resume financing productive projects,” Al-Eqtisadiah business daily quoted experts as saying. Economist Abdul Wahab Abu Dahesh said SAMA’s decision to lower the reverse repo rate apparently helped in substantially increasing the availability of money in the local economy.
“This is the explanation for the large-scale rise in the Kingdom’s stock market,” analysts said, adding that a considerable chunk of the liquidity was likely to be directed toward the market.
The Saudi stock market jumped over 7.83 percent last week. The Tadawul All-Share Index (TASI) closed 18.6 points higher yesterday at 5,644.11. The index is higher by 17.51 percent so far this year.
SAMA cut its reverse repo rate by 25 basis points to 0.5 percent in mid-April. SAMA said that the move was designed to realign the reverse repo with short-dated market rates, which have fallen to historic lows as liquidity conditions have improved and the need for interbank lending has diminished. According to Samba Financial Group’s Economic Monitor for April, banks’ non-statutory deposits with SAMA have risen sharply since the intensification of the global financial crisis in the third quarter of last year, reaching SR74 billion by end-February, up from virtually nothing in October 2008.
Simultaneously, banks have also reined in lending to the private sector: Year-on-year growth in lending remains strong, at around 17 percent, but it has slowed sharply over the past six months, while month-to-month values have fallen.
