A new report by Bloomberg revealed that Saudi lenders are facing the worst funding crunch in over a decade due to the government's failure to manage the country’s economic crisis and corruption.
Sources familiar with the mater said that the Saudi Central Bank placed about 50 billion riyals ($13 billion) as time deposits with commercial lenders, seeking to ease the worst liquidity crunch in over a decade.
The action reflects rising concerns about costly liquidity for banks in Saudi Arabia and its impact on the economy as officials raise capital to power the kingdom’s mega projects.
Growth in bank deposits has lagged Saudi credit expansion driven largely by a boom in mortgages. It has squeezed the money market while the government curtails its oil inflows as part of a more conservative approach to fiscal spending.
Saudi Arabia's non-oil private sector expanded in June at its fastest pace since September as demand continued to rise strongly despite the highest inflation in nearly two years, Reuters revealed.
The headline seasonally adjusted S&P Global Saudi Arabia Purchasing Managers' Index (PMI) for the whole economy rose to 57.0 in June from 55.7 in May and April, edging above the series average since 2008 of 56.8.
The output sub-index, which measures business activity, rose to 61.8 in June from 59.3 in May, also breaching the series average of 61.4.
Input cost inflation was at its highest in 22 months, which led some firms to hike prices.
Bloomberg concluded by stressing that the world's biggest oil exporter isn't immune to a recent run-up in global costs, even as booming crude prices continue to power its economy.
