UPDATE 2-Saudi money supply surges 26.2 pct in Feb-cbank

(Adds analyst's quotes, background)

By Souhail Karam

RIYADH, April 12 (Reuters) - Annual money supply growth in Saudi Arabia accelerated to 26.2 percent in February even as the kingdom tightened lending curbs to control spiralling inflation.

M3, the broadest measure of money circulating in the economy, grew to 827.35 billion riyals ($220.6 billion) at the end of February from 655.83 billion riyals a year earlier, Saudi Arabian Monetary Agency (SAMA) data showed.

Money supply annual growth was 23.9 percent in January. Month-on-month growth slowed however to 1.5 percent in February down from 3.2 percent in January.

"The government continues to spend the money unabatedly," said John Sfakianakis, chief economist at SABB Bank 1060.SE, HSBC's (HSBA.L: Quote, Profile, Research) local subsidiary.

"They have chosen to fiscally support the economy because this is a top-down economy, the government needs to motivate the private sector to create jobs amid a surge in inflation and the challenge of unemployment," he added.

Inflation in the largest Arab economy, which pegs its riyal currency to the dollar, hit 8.7 percent in February -- its highest in 27 years.

"The rise in February's money supply suggests inflation can hit a double-digit figure in March or the month after, which has not happened since the 1970s," Sfakianakis said.