* Commercial bank deposits hit highest level this year
* Sign that liquidity crunch due to cheap oil easing
* Central bank's net foreign assets drop $5.3 billion
* Most of fall is due to selling of foreign securities
* Bank lending growth slows sharply as pressure on firms
By Andrew Torchia
DUBAI, Dec 28 Saudi Arabian commercial bank
deposits rose to their highest level this year in November, a
sign that a liquidity crunch due to low oil prices is easing as
the government liquidates foreign assets to pay its bills,
official data showed on Wednesday.
Bank deposits climbed to 1.624 trillion riyals ($433
billion) from 1.610 trillion riyals in October, the fourth
straight month-on-month gain, the central bank figures showed.
Deposits fell earlier this year as the government, its
revenues shrunk by cheap oil, placed less money with domestic
banks. At the same time, it covered part of a huge budget
deficit by issuing bonds to the banks.
This sent market interest rates soaring, threatening
economic growth and companies' bottom lines. The three-month
interbank rate hit a multi-year high of 2.39 percent
The liquidity picture has been improving since late October,
however, when the government raised $17.5 billion in its first
international bond issue, giving it leeway to suspend domestic
bond issues for the time being.
It has also continued to draw down its financial reserves
abroad and bring the money into the country. The central bank
said its net foreign assets dropped by $5.3 billion
month-on-month to $530.5 billion in November, the lowest level
since November 2011.
The share of assets held in the form of foreign securities
shrank by $4.7 billion to $370.4 billion, but the Saudi central
bank's deposits with banks abroad actually rose slightly, by
$1.4 billion to $103.1 billion.
Deposits of such money into domestic banks have helped bring
the three-month interbank rate down to 2.04 percent in the last
Financial pressure on Saudi companies has also eased because
of the government's decision to pay tens of billions of dollars
of its unpaid debts to the private sector.
Finance minister Mohammed al-Jadaan told Reuters last week
that Riyadh had paid 100 billion riyals to the private sector
over the last two months, and expected to pay an additional 30
billion riyals of claims that it would receive soon.
The payments appear at least partly responsible for a sharp
slowdown in year-on-year growth of bank lending to the private
sector, to 4.4 percent in November - the lowest rate since
When the government wasn't paying companies, they were
forced to draw down credit facilities with banks to obtain
operating funds, inflating credit growth figures, bankers said.
Now that state money is flowing again, firms feel less pressure
to use bank loans.
Liquidity conditions look set to stay relatively benign for
at least a few more months. Jadaan told Reuters that the
government expects to resume monthly domestic bond sales in the
first quarter of 2017, but bankers also expect another Saudi
international bond sale early next year, which would limit the
amount that Riyadh must raise locally.
Also, the 2017 state budget plan, announced last week,
envisions the deficit shrinking to 198 billion riyals next year
from 297 billion riyals in 2016, which could cut the
government's total borrowing requirement considerably.
(Reporting by Andrew Torchia; Editing by Adrian Croft)