Saudi Arabia Provides $2.67 Billion to Help Citizens

By Matthew Brown and Abdulla Fardan

Oct. 26 (Bloomberg) -- The Saudi government will inject 10 billion riyals ($2.67 billion) into the government-run Saudi Credit Bank to provide no-fee loans to low-income citizens, Saudi Press Agency said, citing the finance minister.

``This amount, along with the current resources of the bank, will be allocated for social loans, including loans provided for marriage, family and restoration of houses,'' Finance Minister Ibrahim al-Assaf said in a statement carried on the state-owned news agency.

The measure, ordered by King Abdulla of Saudi Arabia, follows last week's injection of about $5 billion in the form of deposits into Saudi commercial banks and a reduction in reserve requirement. The kingdom's attempt to keep credit available amid a freeze in global markets included a cut in the repo rate Oct. 12, sending the Saudi 3-month average interbank rate to 4.55 percent yesterday from 4.6512 percent Oct. 20.

The Gulf states, including the United Arab Emirates and Qatar, ``have been very proactive,'' Mary Nicola, senior economist at Standard Chartered Plc., said in a telephone interview in Dubai today. ``Credit is tight and banks are being very picky about who they lend to, so this is a safeguard for poorer families.''

Central Bank

Saudi Arabia cut the amount of money that commercial banks have to keep with its central bank to 10 percent from 13 percent, effective from last month, the central bank said in a statement on its Web site yesterday.

Governments across the Gulf from Kuwait to the United Arab Emirates, that provide about 20 percent of the world's daily oil supply, have injected cash into their banking systems in an attempt to maintain lending levels as deposits fail to keep up with loan demand.

The Central Bank of Kuwait has taken measures to increase liquidity at commercial banks in recent weeks, including raising the loan-to-deposit ratio, cutting interest rates, injecting funds into the interbank market and, today guaranteeing commercial bank deposits. The United Arab Emirates said Oct. 12 that it would guarantee all bank deposits for three years.

The Qatar Investment Authority, the emirate's sovereign wealth fund, said Oct. 13 that it would acquire stakes in banks.

To contact the reporters on this story: Matthew Brown in Dubai at mbrown42@bloomberg.netAbdulla Fardan in Bahrain at afardan@bloomberg.net