Saudi money supply grows but credit to private sector drops

The annual growth of Saudi Arabia's money supply rose to its highest level in 2009 after the central bank slashed an interest rate that pays commercial banks for deposits, but credit to private sector kept declining.

M3, the broadest measure of money circulating the economy, stood at SR977.6 billion (Dh957.55bn) on April 30, 18.3 per cent above its level a year earlier, monthly data released by the Saudi Arabian Monetary Agency (Sama) showed.

The annual growth of M3 was 15.8 per cent in March, according to Sama's data. At 18.3 per cent, M3 annual growth was the highest since November, 2008.

On April 14, Sama cut the reverse repo rate by 25 basis points to 0.50 per cent, while it kept the benchmark lending repo rate unchanged at two per cent. The move was expected to unlock more liquidity into the system and spur lending to businesses and households.

But Sama data showed that bank claims on the private sector, a key indicator of lenders' confidence, fell for the second straight month to SR727.47bn, also their lowest level since August.

On an annual basis, bank claims' growth slowed to 11.8 per cent in April compared to 16.3 per cent in March.

In a breakdown of M3 components, the Sama data for April showed that time and savings deposits fell 2.3 per cent compared to March, while other quasi-monetary deposits rose 6.6 per cent.

Sama's net foreign assets slid 2.7 per cent in April, their fifth monthly decline in a row, to SR1.499 trillion. Sama's investments in foreign securities fell for a third straight month in April and deposits with banks abroad fell for a fifth month in a row.

But the central bank raised its foreign currencies and gold by 2.35 per cent in April compared to the previous month, which is the sharpest monthly rise of this item since September 2008.

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