Growth in money supply falls in Saudi

Annual growth in Saudi Arabia's money supply fell for a third month in January to 13.87 percent, from 17.65 percent in December, despite recent aggressive interest rate cuts, central bank data has shown.

The data also showed the Saudi Arabian Monetary Agency's (SAMA) net foreign assets fell by around 1.6 percent in January from December, their sharpest month-to-month fall in at least 12 months.

The net figure was some SR1.62tr in January compared with about SR1.2tr a year earlier, the data, posted on SAMA's website, showed. But compared with their levels in recent months, SAMA's net foreign assets in January were at their lowest level since August.

SAMA did not explain the drop. Saudi officials have repeatedly said the world's top oil exporter was not stung as badly as other states by the global crisis because it sustained a policy of "very liquid, very safe, minimal risk" international assets.

SAMA's monthly report said M3, the broadest measure of money circulating in the economy, climbed to SR928.17bn ($247.5bn) in January compared with SR815.14bn a year earlier.

Compared to its level in December, M3 inched down 0.1 percent in January, the first decline since April. The slight decrease reflected a 4.3 percent month-to-month drop in time and savings deposits, the data showed.

SAMA has eased bank lending restrictions and slashed interest rates by more than half since October in an effort to encourage banks to keep lending amid both easing inflationary pressures domestically and a global credit crisis.

But bank claims on the private sector, an indicator of business confidence, slipped for the third month in a row to SR729.44bn from SR734.56bn in December and SR743.05bn in November.

Analysts were expecting SAMA's net foreign assets to show signs of weakness given that oil prices have tumbled to less than a third of their record high above $147 a barrel last July.

In a breakdown of SAMA's assets, the data showed the Saudi central bank reduced deposits with banks abroad to 353.29 billion riyals in January from SR379.49bn in December and SR384.36bn in November.

At SR1.15tr in January, SAMA's investment in foreign securities was almost unchanged from December but was still below the SR1.17tr level of November. (Reuters)

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