A rate used to price loans in Saudi Arabia climbed to the highest level since the financial crisis. But unlike 2016, it’s the race to stay ahead of Libor, and not a liquidity squeeze, that’s raising borrowing costs.

The three-month Saudi interbank offered rate advanced on Tuesday to 2.38625 percent, two basis points above the London interbank offered rate on Monday, according to data compiled by Bloomberg.

Saudi Arabia’s currency is pegged to the dollar and the country usually follows U.S. interest rate decisions. This year, the Saudis preempted the Federal Reserve by boosting its benchmark repurchase rate for the first time since 2009 as Libor climbed above Saibor for the first time in almost a decade, which could spur capital flight from riyal assets.

To help drive up Saibor, the governor of the Saudi Arabian Monetary Agency, Ahmad Abdul Karim Al Kholifey, said in April that policy makers are prepared to allow deposits at lenders to mature, which would drain funds from the banking sector.

Avoiding a discount

The rise in Libor, Saudi Arabia’s interest rate increase and Sama’s willingness to let some deposits run down are all contributing to pushing up Saibor, Monica Malik, the chief economist at Abu Dhabi Commercial Bank PJSC, said by phone. “The Saudi economy doesn’t need higher interest rates, and Sama will likely be satisfied if Saibor is largely in line with Libor, though it will likely not want to see a discount reemerging.”

Saudi Arabia’s economy, the largest in the Arab world, shrank in 2017 for the first time since the financial crisis as the government coped with a drop in oil prices by cutting spending. Demand for credit slowed, boosting liquidity at banks: as of March, banks had lent only 87 riyals for every 100 riyals of deposits that they hold, according to the most recent central bank data.

Sama “wouldn’t want to put up market rates more than needed in a weak demand environment,” Malik said.