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Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion
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Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's liquidity levels continued to grow strongly, reaching SAR2,825,715 million at the end of May 2024, marking an annual growth of approximately 8.6%, reported the Saudi Press Agency on Sunday.

This represented an increase of more than SAR222,928 billion compared to the same period in 2023, which stood at SAR2,602,786 million. These levels reflect the broad money supply (M3) as reported in the Saudi Central Bank (SAMA)'s monthly statistical bulletin for May 2024.

Since the beginning of the year, liquidity has grown by 4%, representing an increase of more than SAR104,757 billion. At the end of January, it stood at SAR2,720,957 million.

Liquidity levels also achieved a monthly growth of approximately 1.2%, with an increase of about SAR32,402 billion compared to the end of April of the same year when it stood at SAR2,793,313 million.

These liquidity levels strongly support economic and commercial activity, contributing effectively to the economic development process and enabling the achievement of the goals of Saudi Vision 2030. This reflects the strength and solidity of the banking and financial sector.

A breakdown of the four components of the broad money supply (M3) is as follows: Demand deposits, the largest contributor to the total money supply (M3) at 49.2%, recorded a level of SAR1,390,893 million at the end of May 2024.

Time and savings deposits, the second-largest contributor to the total money supply (M3) at 31.5%, recorded a level of SAR889,558 million.

Other quasi-money deposits amounted to SAR314,807 million, representing a contribution of approximately 11.1% to the total money supply (M3), making it the third-largest contributor. Lastly, "currency in circulation outside banks" amounted to SAR230,456 million, contributing approximately 8.2% to the total money supply (M3).

Quasi-money deposits consist of residents' deposits in foreign currencies, deposits against letters of credit, outstanding transfers, and repurchase agreements (repos) conducted by banks with the private sector.

Domestic liquidity includes M1, which comprises currency in circulation outside banks in addition to demand deposits only, and M2, which includes M1 plus time and savings deposits. The broad definition, M3, includes M2 plus other quasi-money deposits.

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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo

European Central Bank President Christine Lagarde renewed her call for economic integration across Europe on Friday, arguing that intensifying global trade tensions and a growing technology gap with the United States create fresh urgency for action.
US President-elect Donald Trump has promised to impose tariffs on most if not all imports and said Europe would pay a heavy price for having run a large trade surplus with the US for decades.
"The geopolitical environment has also become less favorable, with growing threats to free trade from all corners of the world," Lagarde said in a speech, without directly referring to Trump.
"The urgency to integrate our capital markets has risen."
While Europe has made some progress, EU members tend to water down most proposals to protect vested national interests to the detriment of the bloc as a whole, Reuters quoted Lagarde as saying.
But this is taking hundreds of billions if not trillions of euros out of the economy as households are holding 11.5 trillion euros in cash and deposits, and much of this is not making its way to the firms that need the funding.
"If EU households were to align their deposit-to-financial assets ratio with that of US households, a stock of up to 8 trillion euros could be redirected into long-term, market-based investments – or a flow of around 350 billion euros annually," Lagarde said.
When the cash actually enters the capital market, it often stays within national borders or leaves for the US in hope of better returns, Lagarde added.
Europe therefore needs to reduce the cost of investing in capital markets and must make the regulatory regime easier for cash to flow to places where it is needed the most.
A solution might be to create an EU-wide regulatory regime on top of the 27 national rules and certain issuers could then opt into this framework.
"To bypass the cumbersome process of regulatory harmonization, we could envisage a 28th regime for issuers of securities," Lagarde said. "They would benefit from a unified corporate and securities law, facilitating cross-border placement, holding and settlement."
Still, that would not solve the problem that few innovative companies set up shop in Europe, partly due to the lack of funding. So Europe must make it easier for investment to flow into venture capital and for banks to fund startups, she said.