Saudi Arabia’s spending strains banks’ balance sheets

Significance

Previously in April, Saudi banks put together a SAR10bn (USD2.7bn) revolving credit facility for NEOM, the largest of a cluster of ‘giga-projects’ backed by the PIF. This increased demand puts pressure on banking liquidity while also making it more difficult for private-sector investors to access credit.

Impacts

• Difficulty in accessing credit will affect non-oil private sector growth, which is already showing signs of slowing down.
• The squeeze on domestic liquidity will result in increased external borrowing by the government and the private sector.
• The government will accelerate efforts to attract foreign investment via the capital market.