Economics
Saudi Hands Tied as Rising Rates Risk Worsening Economy Woes
- Dollar-linked riyal means rate cut to boost growth unlikely
- Government withdrawals amid oil slump led to liquidity crunch
Assessing the Health of the Saudi Economy
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Saudi Arabia’s currency peg is forcing the central bank to look beyond rate cuts to spur growth, as a slowdown driven by lower oil prices has consumers watching their wallets and contractors facing payment delays.
With a key benchmark for pricing loans at an almost eight-year high, the Saudi Arabian Monetary Agency, as the central bank is known, said this week it’s injecting about 20 billion riyals ($5.3 billion) in the banking sector in the form of deposits “on behalf of government entities.” The move, which preceded a surprise agreement to cut oil output, aims to boost liquidity by making up for the drop in government deposits over the past two years.