DUBAI: Saudi Arabian commercial bank deposits rose to their highest level this year in November, a sign that a liquidity crunch due to low oil prices is easing as the government liquidates foreign assets to pay its bills, official data showed on Wednesday.

Bank deposits climbed to 1.624 trillion riyals (Dh1.588 trillion, $433 billion) from 1.610 trillion riyals in October, the fourth straight month-on-month gain, the central bank figures showed.

Deposits fell earlier this year as the government, its revenues fell due to cheap oil, placed less money with domestic banks. At the same time, it covered part of a huge budget deficit by issuing bonds to the banks.

This sent market interest rates soaring, threatening economic growth and companies’ bottom lines. The three-month interbank rate hit a multi-year high of 2.39 per cent in October.

The liquidity picture has been improving since late October, however, when the government raised $17.5 billion in its first international bond issue, giving it leeway to suspend domestic bond issues for the time being.

It has also continued to draw down its financial reserves abroad and bring the money into the country. The central bank said its net foreign assets dropped by $5.3 billion month-on-month to $530.5 billion in November, the lowest level since November 2011.

The share of assets held in the form of foreign securities shrank by $4.7 billion to $370.4 billion, but the Saudi central bank’s deposits with banks abroad actually rose slightly, by $1.4 billion to $103.1 billion.

Deposits of such money into domestic banks have helped bring the three-month interbank rate down to 2.04 per cent in the last several weeks.

Financial pressure on Saudi companies has also eased because of the government’s decision to pay tens of billions of dollars of its unpaid debts to the private sector.

Finance minister Mohammad Al Jadaan told Reuters last week that Riyadh had paid 100 billion riyals to the private sector over the last two months, and expected to pay an additional 30 billion riyals of claims that it would receive soon.

The payments appear at least partly responsible for a sharp slowdown in year-on-year growth of bank lending to the private sector, to 4.4 per cent in November — the lowest rate since November 2010.

When the government wasn’t paying companies, they were forced to draw down credit facilities with banks to obtain operating funds, inflating credit growth figures, bankers said.

Now that state money is flowing again, firms feel less pressure to use bank loans.

Liquidity conditions look set to stay relatively benign for at least a few more months. Jadaan told Reuters that the government expects to resume monthly domestic bond sales in the first quarter of 2017, but bankers also expect another Saudi international bond sale early next year, which would limit the amount that Riyadh must raise locally.

Also, the 2017 state budget plan, announced last week, envisions the deficit shrinking to 198 billion riyals next year from 297 billion riyals in 2016, which could cut the government’s total borrowing requirement considerably.