Saudi Arabia faces liquidity crunch even as oil exports rebound to pre-war levels
Saudi Arabia faces liquidity crunch even as oil exports rebound to pre-war levels Saudi Arabia is feeling the pinch of a liquidity crisis as bank deposits slow and the economy comes under pressure from the US-Israeli war on Iran, a new report from Bank of America says. In a note to clients, Bank of America said Saudi Arabia is grappling with “contagion” caused by liquidity tightness in the UAE…
Saudi Arabia is experiencing a liquidity crisis despite its oil exports rebounding to pre-war levels, according to a report from Bank of America. The Saudi banking system is facing "contagion" due to liquidity tightness in the UAE and a sharp slowdown in the Saudi economy, the report stated. Saudi banks are struggling as the UAE, which is also suffering from the repercussions of the Iran war and reduced liquidity, tightens its monetary policies.
The interconnected nature of the banks, with numerous interbank transactions, has led to a significant portion of deposits residing in Saudi banks. Meanwhile, government entities are withdrawing funds from these banks, exacerbating the liquidity strain. However, loan demand is high, which is driving up the cost of money for Saudi Arabia.
The liquidity crisis is particularly concerning given that Saudi Arabia's currency is pegged directly to the US dollar, along with other Gulf states like the UAE, Qatar, Oman, and Bahrain.
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