Dubai/Beirut: Saudi Arabia’s central bank is giving itself more tools to help lenders navigate the fallout from low oil prices and the kingdom’s austerity measures.
The Saudi Arabian Monetary Agency, as the central bank is known, said it’s introducing 90-day repurchase agreements and will reduce the weekly debt issuance to 3 billion riyals (Dh2.9 billion, $800 million) from 9 billion riyals.
The decisions, which take effect from October 30, aim to “enhance the domestic monetary conditions,” the central bank said in a statement on Thursday.
It has taken measures to ease a cash crunch threatening to curb lending and slow economic growth. Last month, it decided to inject about 20 billion riyals ($5.3 billion) for banks via deposits from state-run companies. It also introduced seven-day and 28-day repurchase agreements, in addition to the existing overnight operation.
Subsidies
The world’s biggest oil exporter is facing its toughest economic challenge in years as a halving of oil prices pushed it to cut subsidies, wages and spending as well as boost borrowing to bridge the widest budget deficit since 1992. The cash squeeze among the nation’s lenders has driven borrowing rates to near their highest since 2009.
Introducing 90-day repurchase agreements “is one more measure to boost liquidity and lower borrowing costs,” said Mohammad Abu Basha, a Cairo-based economist at investment bank EFG-Hermes.
Saudi Arabia sold $17.5 billion of dollar bonds on October 19, an unprecedented amount for a developing nation, after raising 94 billion riyals from the sale of government bonds to local banks and institutions in the first eight months of the year.
