Prime Highlights
- Saudi Arabia’s money supply jumped 7.6% year-on-year in June to SR 3.12 trillion ($832 billion).
- Time and savings deposits reached SR 1.1 trillion, a 16-year high, fueled by high-yielding terms.
Key Fact
- Demand deposits are still the largest piece at SR 1.49 trillion, 47.9% of the total money supply, even though growth of 5.2% year-on-year slowed.
Key Background
Saudi Arabia’s plutocrat force( M2) hit SR 3.12 trillion($ 832 billion), up a robust 7.63 a time. The steep increase is a sign of adding liquidity in the Kingdom’s banking system, supported by a change in deposit tastes by saviors .
One of the key drivers of this expansion is the increase in time and savings deposits, which rose to SR 1.1 trillion—their highest proportion in 16 years. The interest-bearing deposits have increasingly gained popularity within the prevailing monetary setting, seeing a rise greater than demand deposits, which grew to SR 1.49 trillion but at a lower rate of 5.2%.
Other near-monetary ingredients like foreign currency deposits, letter of credit margins, and repo placements represented approximately 9% of the money supply but dropped 18.5% to SR 280.5 billion. Currency held outside banks, the lowest proportion of M2, went up 6.6% to SR 244.3 billion.
The transition towards time deposits is primarily fuelled by more interest rate returns and banks’ need to secure long-term funding. This comes in the wake of changes to the repo rate, which was reduced from 6% to 5.5% in September 2024 and to 5% in December. There has also been high demand for credit—particularly for Vision 2030 projects, mortgages, and corporate funding—that has compelled banks to offer better deposits and diversify funding sources through bonds, syndicated loans, and certificates of deposit.
Even with strong capital ratios and profitability, the banking industry has experience liquidity tensions, as noted by the IMF. To address this, the Saudi Central Bank put in place a 100-basis-point countercyclical capital buffer in May 2025, together with more stringent loan-to-value and debt burden requirements to ensure financial stability. Industry reports confirm deposits will continue to expand, but lending expansion is likely to surpass it, forcing banks into alternative funding sources like debt issuance.
