Liquidity in the Saudi economy, “M3 money supply”, recorded its highest level ever at the end of last week, September 30, at 2.256 trillion riyals, compared to 2.229 trillion at the end of the previous week.
According to the analysis of the reports unit in the newspaper “Al-Iqtisadiah”, which was based on the data of the Saudi Central Bank “SAMA”, the money supply increased by 13.6 percent (271 billion riyals) from its levels before the outbreak of the Corona pandemic, which amounted to 1.985 trillion riyals at the end of 2019.
The money supply rose 1.22 percent during the past week, compared to the previous week, and 4.99 percent (107 billion riyals) since the end of last year, when it was 2.149 trillion riyals.
Since the week ending on May 7, 2020, the money supply has remained above two trillion riyals, reaching a record level at the end of last week.
Increasing the money supply and lowering interest rates, an “expansionary monetary policy”, contributes to enhancing aggregate demand, which supports GDP and employment, which is a useful policy to reduce unemployment and the economic downturn expected to extend to most countries of the world with the Corona pandemic.
And in early June 2020, the Saudi Central Bank announced an injection of 50 billion riyals to support liquidity in the banking sector to enable it to continue financing the private sector.
He said, “This liquidity will enhance the role of banks in modifying or restructuring their financing without any additional fees, and support plans to maintain employment levels in the private sector, in addition to exempting a number of fees for electronic banking services.”
And “M3 money supply” is the sum of “cash in circulation outside banks”, “demand deposits”, “time and savings deposits”, and “other quasi-monetary deposits”.
And “other quasi-cash deposits” are, residents’ deposits in foreign currencies, deposits against letters of credit, existing transfers, and “repo” operations that banks have implemented with the private sector.
Regarding the components of “M3 money supply” last week, money supply M1 “cash in circulation outside banks + demand deposits” increased 1.54 percent, compared to the previous week, while it rose 2.61 percent, compared to the end of last year.
The money supply M2 “cash in circulation outside banks + demand deposits + time and savings deposits” increased by 1.14 percent, compared to the previous week, but it rose by 1.74 percent, compared to the end of last year.
Over the course of 28 years, the “M3 money supply” has witnessed annual growth, so that it doubled more than nine times during that period, as it was about 228 billion riyals in 1993, while it ended 2020 at 2.149 trillion riyals.
During the period from 1993 to 2008, the “money supply” did not exceed one trillion riyals, while it exceeded it at the end of 2009 to reach 1.029 trillion riyals.
Since 2009, the “money supply” has not exceeded two trillion riyals, except during the past year, recording 2.009 trillion riyals at the end of March, and then the “money supply” has exceeded two trillion riyals more than once after.
Economic Reporting Unit
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