SAMA provides $13 billion to banks for improving liquidity

By Rahul Vaimal, Associate Editor
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Saudi Arabian Monetary Authority (SAMA) is advancing $13.29 billion into the banking sector to raise liquidity and improve the lending capability of financial institutions as part of its sustained attempts to boost the sector during the coronavirus pandemic.

Based on SAMA numbers, Financial Institutions in the country are functioning well and pointers exhibit their total assets at the end of the first quarter grew 14 percent to $732.5 billion from a year earlier.

Credit facilities to the private sector in the first three months of the year increased 12 percent and the average capital adequacy ratio touched 18.6 percent, while the liquidity coverage ratio increased more than 200 percent.

“These indicators positively reflect the continued pivotal role of commercial banks in the economic development of the kingdom,”
– SAMA Statement

The action arises after the central bank’s March statement of a $13.3 billion stimulus package to spur its private sector and counteract the consequences of COVID-19 on the country’s economy.

Under its Private Sector Financing Support Programme, SAMA shared about $7.9 billion to banks and funding companies to defer the payment of the dues of the financial sector from small and medium-sized businesses for a term of six months.

“The purpose of the program is to mitigate the [effect] of precautionary coronavirus measures on the SME sector, specifically by reducing the burden of cash flow fluctuations, supporting working capital, enabling the sector to grow during the coming period and contributing to supporting economic growth and maintaining employment,” SAMA updated in March.

Concessionary finance for SMEs of up to $3.5 billion and loan guarantees worth $1.5 billion is also part of the package. SAMA’s actions are part of several government initiatives aimed to lessen the economic shock of the pandemic on the kingdom during a global slowdown.

Saudi Arabia, the largest oil exporter in the world, has begun slowly opening up its economy after severe mobility constraints that led to the closing of all but essential businesses in the country.

Saudi Arabia’s King Salman signed a package of additional measures in April 2020. The government set aside $13.3 billion to expedite up amounts to the private sector. The government also published a reduction of 30 percent on electricity bills for businesses in the commercial, industrial and agricultural sectors for a duration of two months, with the chance of extensions if required.

Last month, Saudi Arabia’s finance minister Mohammed Al Jadaan said there was enough liquidity in the country’s financial markets. He also stated the kingdom would take any steps needed to alleviate the economic loss caused by COVID-19 and cheaper oil prices.