Riyadh: Saudi Arabia central bank Governor Ahmad Al Kholifey said a cash crunch that squeezed commercial lenders last year is over and that he’s open to more foreign banks operating in the biggest Arab economy.
The Saudi Arabian Monetary Authority sees no need for further steps to boost banking liquidity, Al Kholifey said in an interview with Bloomberg Television in Davos on Thursday, his first with an international news organisation since taking office last year.
Al Kholifey, a former deputy governor, was appointed in May as the world’s biggest oil exporter grappled with the impact of low crude prices on the economy. With falling oil revenue, the government drew down on its deposits in the banking system, causing a cash squeeze that sent a key measure used to price loans to the highest level since 2008.
Policymakers responded by injecting billions of riyals into the banking system and deploying other monetary policy tools to ease the strain. Authorities also sold the biggest ever bond from an emerging market in October and cut weekly domestic debt issuance. Interbank rates have fallen 15 per cent since peaking at 2.386 in October.
‘Had to Intervene’
“We had to intervene,” Al Kholifey said. The central bank is now comfortable with current liquidity levels “and I don’t think we need to intervene anymore,” he said.
“Further foreign borrowing by the government in the first quarter of 2017 will be important for domestic liquidity, reducing the need for the government to borrow internally,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
