Savings deposits hit highest share in 16 years as Saudi money supply climbs to $815bn

23/05/2025 01:28 AST

Saudi banks' money supply rose 8.22 percent year on year to SR3.06 trillion ($815 billion) in March, driven by a sharp surge in time and savings deposits, recent data showed.

According to figures by the Saudi Central Bank, also known as SAMA, this category increased by 27.55 percent during the period to reach SR1.07 trillion, the greatest growth rate in over 14 months. It now accounts for 35.2 percent of the total money supply, marking its highest share in 16 years.

The notable shift reflects changing behavior among depositors, increasingly favoring interest-bearing accounts amid ongoing global monetary tightening.

While the US Federal Reserve kept rates steady in recent months following 100 basis points of cuts last year, the risk of renewed inflation, partly due to rising import tariffs, may have delayed further easing.

Given that SAMA typically mirrors Fed rate decisions to maintain the riyal's dollar peg, this has reinforced the appeal of yield-generating instruments like term deposits among Saudi savers.

Term deposits, which offer higher returns than conventional bank accounts in exchange for holding funds over a fixed period, have become more attractive to Saudi savers seeking to lock in interest income amid volatile economic signals.

Despite this surge, demand deposits, accounts that allow immediate access to funds, still hold the largest share at 47.84 percent, or SR1.46 trillion. However, this marks their lowest proportion in nearly five years.

Growth in this category slowed to 3.9 percent year on year, reflecting a broader migration toward savings products.

Meanwhile, quasi-money deposits, which include foreign currency deposits and marginally liquid instruments, declined by 22.85 percent to SR266.87 billion, representing 8.73 percent of the total.

Currency outside banks rose by 10.57 percent to SR251.53 billion.

Credit to businesses in the Kingdom has witnessed robust growth in recent quarters, underpinned by increased demand from key sectors such as real estate, construction, manufacturing, and broader non-oil economic activities.

According to data from SAMA, corporate lending grew by over 22 percent year on year in March, reflecting the banking sector's critical role in financing Vision 2030-linked projects and supporting economic diversification.

This strong lending momentum has contributed to a tightening liquidity environment. As loans continue to grow at a faster pace than deposits, reflected in the rising loan-to-money supply ratio, which climbed from 95 percent in March 2024 to 101.51 percent in March 2025, banks have increasingly turned to capital markets to maintain liquidity.

In particular, Saudi banks have ramped up their sukuk issuances and other debt instruments to meet financing demand while preserving balance sheet stability.

For example, several major financial institutions, including Al Rajhi Bank and Saudi National Bank, have recently raised multibillion-riyal sukuk to bolster their funding base.

Saudi Arabia's expanding reliance on debt markets to fund its ambitious development agenda has been met with continued confidence from major credit rating agencies, reflecting the Kingdom's robust fiscal position and commitment to economic diversification.

In 2024, the total value of listed sukuk and debt instruments in the Kingdom rose by more than 20 percent year-on-year, reaching SR663.5 billion, up from SR549.8 billion in 2023, according to data from the Capital Market Authority. This marks a significant acceleration in domestic debt issuance, underscoring the sector's growing dependence on capital markets to maintain liquidity amid sustained loan expansion.

Moody's Investors Service upgraded Saudi Arabia's credit rating to "Aa3" from "A1" in November, citing the country's efforts to diversify beyond its oil economy.

The agency noted that these diversification efforts would mitigate the Kingdom's vulnerability to oil market fluctuations and the global carbon transition over time.

Similarly, S&P Global Ratings revised Saudi Arabia's outlook to positive in September, affirming its "A/A-1" ratings.

The agency highlighted the Kingdom's strong non-oil growth outlook and economic resilience, expecting an acceleration of investments to develop newer industries, such as tourism, and diversify the economy away from its primary reliance on the upstream hydrocarbon sector.

These affirmations by major credit rating agencies underscore the nation's solid creditworthiness and the effectiveness of its economic reforms under Vision 2030, even as it increases borrowing to finance its transformative projects.

Arab News