ALBAWABA - The money supply of Saudi banks climbed by 8 percent as of March in comparison with the same period a year earlier, hitting SR2.82 trillion ($753 billion), the Saudi Central Bank (SAMA) reported. This increase was driven mostly by a nearly 21 percent increase in banks' term and savings accounts, which reached SR843.25 billion.
The US Federal Reserve's anti-inflationary fiscal stance, which has pushed up interest rates in the Kingdom, has encouraged people and businesses to open term deposits in order to seek greater earnings. Additionally, the number of accounts held by government-affiliated entities, decided to go with term deposits with commercial banks as a means of directing their excess cash, has seen an increase.
Remarkably, in 2022 SAMA hiked key policy rates seven times, and in 2023 it raised them four more times, as reported by Arab News. In July 2023, the central bank elevated its repo rate by 25 basis points to 6 percent, reaching the highest figure since 2001. No changes have been made to the pricing since then.
S&P Global anticipated in their April report that the funding resumes of financial institutions in the Kingdom are likely to shift primarily as a result of a government-supported effort focused on improving homeownership, suggesting that Saudi financial institutions would investigate different methods of financing to deal with the swift increase in lending, caused by increasing demand of new loans.
Their analysis shows that by the latter part of 2023, mortgage lending made up 23.5 percent of all credit allocated by Saudi banks, up from 12.8 percent in 2019, indicating that the continuing funding requirements of the Vision 2030 economic initiative, along with comparatively slow deposit progress, will probably lead banks to look for other sources of funding, including outside funding.
