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Sama's Governor Hamad Saud Al Sayyari (SUPPLIED)
Annual growth in the Saudi money supply rose for the first time in three months in August but the Arab World's largest economy is beginning to feel strains of a liquidity squeeze, central bank data showed yesterday.
The annual growth of money supply, an indicator of future inflation, reached 21.8 per cent in August, up from 20.85 per cent in July, according to monthly data released by the Saudi Arabian Monetary Agency (Sama).
M3, the broadest measure of money circulating in the economy, hit SAR 885.77 billion (Dh866.8bn) at the end of August, compared with SAR727.15bn a year earlier, Sama said.
Annual inflation eased off from a peak of at least 30 years to 10.9 per cent in August, compared to 11.1 per cent in July.
Demand deposits, the largest component of M3, recorded a 1.95 per cent month-to-month fall in August, its strongest decline in at least a year and a second monthly drop in a row, to SAR342.31bn, which was its lowest level since April of this year.
Bank claims on the private sector also recorded in August their lowest monthly rise in at least 12 months. They rose one per cent which is less than half the average monthly growth in the seven months to July, 2008.
Sama's Governor Hamad Saud Al Sayyari told Reuters last month that banks in the world's largest oil exporter are not facing a shortage of funding, although he said the bank could open new windows for any future liquidity needs.
The bank has raised interest rates steadily and tightened reserve requirements four times since last November, to 13 per cent from seven per cent, due to a flood of foreign investor cash which had raised liquidity and bolstered inflation.
But inter-bank rates in Saudi Arabia have more than doubled since early May as credit markets tightened and investors withdrew bets on Gulf states revaluing their dollar-pegged currencies to fight inflation.
Sama's total net foreign assets hit SAR1.56 trillion at the end of August compared with SAR930.7bn a year earlier.
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