According to a report by the National Commercial Bank,Saudi Arabia's monetary system continues to overflow with liquidity as the monetary base for the fifth consecutive month,expanding by 16.4%and setting an all time record at SAR 334.9 billion during October,surpassing January's SAR 299.4 billion by quite a feat.
The report said that on an annual basis,M0 increased by 28.9%,a growth figure unseen in almost three years.The Saudi Arabian Monetary Agency will certainly be challenged to limit the risks from such excess liquidity.
The main driver was deposits with SAMA which grew by a staggering 51.5%.The cyclical increase in deposits with SAMA during the Q4 of the fiscal year has been apparent over the past five years as banks overhaul their balance sheets for annual reporting toward the end of the year.
In addition,currency outside banks recorded a growth of 12.2%to reach SAR 138.0 billion during October.Furthermore,cash in vault reached SAR 27.1 billion,an annual rise of 10.0%during the same month.
The bank said that"The rise of M0 is October was higher than expected,but we still expect a slowdown for the next few months as base effects offset the pace of annual acceleration."
As for broad money,growth edged closer to the elevated levels of 2011 by posting an increase of 13.0%by the end of October.The highlight of broad money was the sizable growth in time and savings deposits.Amid the globally suppressed interest rate market,time and saving deposits managed to gain a significant 15.2%during October over the same month last year.The rise resulted in increasing its share of M3 to 24.1%at SAR 325.0 billion.
Meanwhile,the main component of broad money,demand deposits,continues to outpace time and savings deposits by posting an increase of 15.8%.The last component of M3,other quasi monetary deposits,remained stagnant as it only recorded a 0.3%gain on an annual basis.However,due to the aforementioned,SAMA managed to increase its net foreign assets by a substantial 20.7%during October to reach SAR 2.35 trillion.The elevated levels of oil prices and overflow of liquidity aided the buildup of excess reserves which reached 59.5%during the month,up from June's 44.6%.