Dubai: Provisions booked by Saudi banks last year for credit losses are "very high" but lenders are now in a stronger position than they were during the global economic meltdown, the governor of the Saudi Arabian Monetary Authority, or SAMA, said in an interview Monday.

"The provisions taken by our banks during 2009 year are very high by all standards," Mohammad Al Jasser told the Dubai-based channel in an interview posted on SAMA Web site.

Local lenders in the Arab world's largest economy were slightly affected by the global slowdown and can weather any future crises as they maintain strong banking cover, Jasser said.

Increases

Several Saudi banks hiked provisions last year amid ongoing concerns over the state of the world economy and exposure to financially troubled Saudi conglomerates Saad and Algosaibi.

Riyadh-based Al Rajhi Bank, the Arab Gulf's largest lender by market value, put aside a total of 1.82 billion Saudi riyals (Dh1.7 trillion) to cover Saudi Arabia, which pegs its currency to the dollar and is one of the largest holders of US Treasury bills, will still witness good growth this year and its foreign assets are in a solid position, Jasser said.

But the central bank will not hesitate to draw on some foreign reserves, if needed, to finance the kingdom's budget designed to stimulate the economy, he said.

Saudi Arabia, which has filled its coffers with surplus income from oil exports this decade, has drawn on its reserves to fund record budgets and keep its $400 billion (Dh1.46 trillion) five-year infrastructure development programme on track.

It forecasts its fiscal deficit to jump to $18.67 billion for 2010 from a planned $12 billion last year, as it continues to focus on leveraging economic development and enhancing investment environment.

Inflation

But despite the rise in the fiscal deficit, Saudi Arabia has no plans to issue debt in the near future, the central bank governor said, adding that the country will see less inflationary pressures in 2011 and 2012.

Saudi Arabia's annualised inflation rose to 4.6 per cent in February, the fastest pace since June, compared with 4.1 per cent in January due to a slight rise in food prices and rents, data from the Central Department of Statistics and Information earlier this month.