Saudi Arabia's money supply hits $832bn as time deposits share reach 16-year high

10/08/2025 02:56 AST

Saudi Arabia's money supply rose to a record SR3.12 trillion ($832 billion) in June, marking a 7.63 percent annual increase, driven predominantly by a sharp rise in time and savings deposits.

According to data from the Saudi Central Bank, also known as SAMA, these income-generating accounts, now totaling around SR1.1 trillion, represent the highest share of the money supply in 16 years.

While demand deposits - non-interest-bearing checking accounts - remain the largest component at 47.93 percent, or SR1.49 trillion, their growth at 5.2 percent year on year has lagged that of savings accounts, which grew 21.71 percent over the same period.

Other quasi-monetary instruments, including residents' foreign currency deposits, marginal deposits related to letters of credit, outstanding remittances, and repo placements, account for roughly 9 percent of the money supply.

However, this category declined 18.54 percent, dropping to SR280.54 billion. Meanwhile, currency outside banks, although the smallest component at 7.83 percent, increased 6.6 percent to SR244.31 billion.

Why are time deposits surging?
Global monetary tightening and attractive yields are key factors. After previously peaking at 6 percent, SAMA reduced its repo rate in stages, mirroring that of the US Federal Reserve - first to 5.5 percent in September 2024, then further to 5 percent in December 2024.

Despite these cuts, the current rate remains relatively elevated compared to the prolonged low-rate environment of previous years, making fixed-term, interest-bearing accounts more attractive than demand balances.

Strong lending growth, particularly in sectors tied to Vision 2030, mortgage financing, and corporate borrowing, has outstripped deposit inflows. As a result, banks face increased funding needs and have ramped up offerings on time deposits to attract liquidity.

The 2025 International Monetary Fund Article IV Mission noted that while banks maintain strong solvency at 19.6 percent and a healthy return on assets, liquidity pressures are building, and liquid assets relative to short-term liabilities have declined.

In response, banks are expanding liabilities through bonds, syndicated loans, and certificates of deposit. Notably, net foreign assets turned negative in 2024 for the first time since 1993, highlighting rising external borrowing.

To address risks, SAMA introduced a 100-basis-point countercyclical capital buffer in May 2025, and the IMF welcomed this step, along with tighter loan-to-value and debt burden measures, plus potential foreign-currency liquidity ratios to bolster financial stability.

Market analysts foresee continued strength in time and savings deposits. Alvarez & Marsal's first quarter Banking Pulse reported that deposits rebounded 4 percent quarter on quarter, led by an 8.1 percent increase in time deposits, following a seasonal dip at the end of 2024.

Likewise, Fitch Ratings, in its March 2025 forecast, projected lending growth of 12-14 percent, led by corporate demand, to continue outpacing deposit growth.

Fitch expects Saudi banks to issue more than $20 billion in debt this year as they shift toward non-deposit funding. This, coupled with the continued dilution of CASA "current and savings accounts" and competition for funding, may blunt the benefits of lower policy rates on banks' net interest margins.

Arab News