DUBAI Feb 28 Annual growth in Saudi Arabian
bank lending slowed in January to its lowest level in nearly
seven years, official data showed on Tuesday, a sign of weak
corporate demand but also improving liquidity in the economy.
Bank loans to the private sector rose just 1.8 percent from
a year earlier, compared to 2.4 percent in December, the central
bank said. It was the slowest growth since February 2010, when
the Saudi economy was still recovering from the global financial
The sluggish growth shows private companies have little
desire to make fresh investments, because of an economic slump
caused by low oil prices and government austerity measures.
But it is also a sign that money is flowing more freely
through the economy. For much of 2016 the government, its
finances strained by lower oil export earnings, delayed paying
its debts to private firms. This forced them to draw down credit
facilities with banks just to obtain operating funds, inflating
loan growth figures.
In the last few months the government's coffers have been
partly replenished by higher oil prices and a jumbo $17.5
billion debut international bond issue. This has encouraged it
to resume paying its debts, and with state money flowing again,
firms feel less pressure to use bank loans.
The combination of renewed flows of government money and low
demand for new loans is causing Saudi money rates to plunge. The
three-month interbank offered rate, which soared to
an eight-year high of 2.386 percent in late October, fell to
1.7875 percent on Tuesday, its lowest level since last March.
The government is continuing to draw down assets abroad to
help cover a budget deficit caused by low oil prices. Net
foreign assets at the central bank fell by $12.0 billion from
the previous month to $516.7 billion in January, their lowest
level since August 2011.
Among those assets, the central bank's holdings of foreign
securities dropped by $4.5 billion to $359.5 billion, while
deposits with banks abroad decreased by $6.7 billion to $100.3
October's debut international bond issue opened up a new
channel for the government to raise funds, reducing pressure on
its foreign reserves, and at least one more foreign bond sale is
expected in coming months.
Last week, sources familiar with the matter told Reuters
that Riyadh had sent a request for proposals to banks for a
planned U.S. dollar Islamic bond issue. Saudi Arabia is also
expected to issue a conventional bond in the international
market later this year, another source said.
(Editing by Andrew Roche)