Saudi Arabia faces liquidity crunch even as oil exports rebound to pre-war levels

Detailed summary

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…

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 and a rapid slowdown in the kingdom’s own economy, according to an article published on Bloomberg on Tuesday.

The report said Saudi banks are feeling the pain in the UAE, which is also grappling with fallout from the Iran war and tighter liquidity. Saudi banks are closely linked to their Emirati neighbours, with a high number of interbank transactions contributing to deposits at Saudi banks.

At the same time, the Saudi economy is under strain and government entities are making withdrawals from Saudi banks. But loan demand is high, which is effectively raising the cost of Saudi money.

The liquidity strain is notable for Saudi Arabia because its currency is directly pegged to the US dollar, along with Gulf states including the UAE, Qatar, Oman, and Bahrain.

Opening of the article, excerpted from Middle East Eye. To read the rest, open the article on the publisher's site.