Public-sector borrowing outpaces private credit at Saudi banks

Saudi banks’ fastest-growing customer is the public sector. Bank credit to public-sector enterprises reached SAR 273.7 bn in July, up 19.6% y-o-y. That’s nearly three times the 6.8% pace of the loan book overall, according to the Saudi central bank’s monthly bulletin (pdf).

State-linked borrowers — who account for 8% of total credit — delivered around a fifth of the c. SAR 218 bn the system added over the past 12 months. Add the SAR 671 bn of government and quasi-government bonds sitting on bank balance sheets and direct exposure to the state complex runs to c. SAR 945 bn — roughly 18% of the sector’s SAR 5.19 tn in assets.

The private side of the ledger is moving the other way. New letters of credit — our look-ahead for imports — fell 18.4% m-o-m to SAR 12.7 bn. Settled LCs financing private-sector imports were down 5.7% y-o-y at SAR 14.9 bn, with every major category falling m-o-m except food. Building materials, still the largest settled category at SAR 3 bn, drew only SAR 2 bn in new LCs. That signals the pipeline is thinner than the flow it’s replacing.

Mortgages also ticked up: Bank-financed residential mortgages rose 3% m-o-m to SAR 5.9 bn in July, on an increase in new contracts to 9.6k from 8.8k the previous month.

Broad money supply (M3) dropped marginally to SAR 3.36 tn in July, compared to SAR 3.38 tn in June. Demand deposits made up 42.8% of the total, followed by time and savings deposits (41.6%) and other quasi-money deposits (8.2%). Total liabilities in the survey reached SAR 5.75 tn, up 6.7% y-o-y.

SOUND SMART- M3 is the broadest measure of money supply in an economy. It includes banknotes, current accounts, and other money that can be quickly mobilized (what econ nerds call M2), as well as large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid funds.

Net foreign assets in the banking sector edged up to SAR 1.54 tn in July from SAR 1.53 tn in June. The marginal rise came from commercial banks, whose net foreign asset deficit narrowed to SAR 210.8 bn from SAR 233.7 bn, offsetting a dip in Sama’s own net foreign assets to SAR 1.75 tn from SAR 1.77 tn.

Government and quasi-government bonds amounted to SAR 671 bn, a 6.2% increase compared to June 2025.