Saudi banks’ liquidity crunch is temporary, says finance minister

A liquidity shortage in Saudi Arabia’s banking system that pushed funding costs to record highs this year is temporary and mainly driven by broader market volatility, the kingdom’s finance minister said.
“I’m not worried about liquidity,” Mohamed al-Jadaan told reporters in Riyadh. “There are sufficient levers at the central bank disposal, including using our money.”
The cost of money as measured by the three-month Saudi Interbank Offered Rate, or Saibor, surged to a record this year, rising higher than it did during the 2008 global financial crisis. A 50bn riyal ($13bn) injection by the central bank in June helped ease liquidity conditions through the summer before they started to tighten again.
Recently, the central bank, known as SAMA, has been relying on open market operations — transactions that allow it to provide or drain short-term liquidity in exchange for securities from lenders, Bloomberg News reported. Saibor is down to 5.28% this month.
Al-Jadaan said the government will continue to access debt markets with the kingdom’s sovereign wealth fund, the Public Investment Fund, following through on its plans.
“We are prepaying maturing debt,” he said. “If there are market opportunities to actually increase our debt, even if we don’t need it immediately, we will.”
Saudi Arabia has a $3bn bond maturing next year and another $1bn in 2024, according to data compiled by Bloomberg.
The world’s largest oil exporter is on track to run its first budget surplus in about a decade after seeing revenues soar on the back of higher oil production and a rally in prices above $100 a barrel.
Saudi Arabia boosted its forecast for next year’s budget surplus compared with projections made just three months ago, in a sign of confidence that its revenues will hold up despite jitters in the oil market and fears of a global economic slowdown.
The government’s latest fiscal outlook, unveiled on Wednesday, showed it now expects to run a surplus of 16bn riyals in 2023, nearly double a previous estimate of 9bn riyals. The economy is still forecast to expand 3.1%.
Revenues are now set to reach 1.13tn riyals, slightly more than projected earlier, according to the Finance Ministry. Expenditure next year is expected at 1.114tn riyals, unchanged from the government’s estimate published in September.
“We are not celebrating the surplus,” al-Jadaan told reporters. “It’s something that we expected, we’ve been working to curtail our spending and to increase our non-oil revenues.”