The Saudi Arabian Monetary Agency (SAMA) has liquidity available if banks need it, but no lenders have so far stepped forward to request additional funding, its central bank governor said on Wednesday. “SAMA has liquidity if needs from banks arise,” Hamad Al-Sayyari said. “No bank has stepped forward to ask for additional liquidity.” He said Saudi banks were in a good position to weather a global downturn. “Figures point to strong growth in loans, money supply, banks have liquidity, additional deposits. There is no scarcity in liquidity,” Al-Sayyari told reporters. “Banks want to expand. This conflicts with our policy in limiting the increase in liquidity and the rise in inflation.” Al-Sayyari added that the Saudi central bank followed a conservative policy and did not invest in “high-risk” assets abroad. Al-Sayyari ruled out any change in the Kingdom's dollar-pegged foreign exchange policy. He said a US government plan to bailout troubled financial companies was a bold step in the right direction. “The US bailout plan is a bold step in the right direction, but it is too early to judge since it is not approved, not implemented yet,” he said. Al-Sayyari also said that inflation in the Kingdom could begin declining in the first quarter of 2009, later than previously expected. “The inflation correction could happen in the first quarter of 2009 instead of the second half of 2008,” Al-Sayyari said. He said a deficit in housing was the key driver for inflation, which may need “two to three years to start declining.” In April, Al-Sayyari said inflation could cross 10 percent this year before possibly easing in the second half of the year. The Saudi cost of living index was 117.9 points on August 31, compared with 106.3 points a year earlier. Meanwhile, the Gulf Arab central banks said on Wednesday they would be ready to provide liquidity to help local lenders resist a global financial crisis if necessary but saw no need to step in yet. Interbank lending rates have risen across the world's biggest oil-exporting region as a global liquidity crunch has left banks struggling to finance major infrastructure, real estate and industrial projects during an economic boom. Two days after UAE set up a AED50 billion dirham ($13.62 billion) emergency lending facility, central banks in Saudi Arabia and Oman said they too were prepared to help lenders cope with funding shortfalls.
