RIYADH: Growth in Saudi Arabian bank lending almost halted in February, central bank data showed on Tuesday, with companies holding back from investment in the face of stubbornly low oil prices and concern over government austerity policies. Bank lending to the private sector showed year-on-year growth of only 0.3 percent in February, slowing from 1.8 percent in January and down sharply from the 10 percent registered a year earlier.
Bankers say part of the reason for the lending slowdown is that state money is flowing more freely through the economy than it was for most of last year, when the government stopped paying many of its bills as low oil prices took a heavy toll on public coffers. The lack of government payments forced companies to draw on credit facilities for operating funds, inflating loan growth. In the past few months, Riyadh has resumed bill payments, easing the pressure on companies. However, companies remain nervous about investing as the government plans fresh austerity measures in coming months, including domestic fuel price rises and a tax on tobacco and sugary drinks, which will increase companies’ costs and weigh on consumer demand.
In a sign of sluggish consumer spending, cash withdrawals from automated teller machines dropped to the lowest level for more than a year in February, the central bank data showed, while the government continued to draw down foreign assets to help pay its bills. Net foreign assets at the central bank fell by $9.8 billion from the previous month to $506.9 billion, their lowest level since August 2011. They reached a record high of $737 billion in August 2014 before starting to fall. Among those assets, most of which are believed to be in U.S. dollars, deposits with banks abroad dropped by $5.2 billion to $95.1 billion. Investments in foreign securities shrank by $4.3 billion to $355.3 billion.
