Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth

Strategic partnerships with leading space agencies and organizations propel the Kingdom’s space aspirations to new heights. (Shutterstock)
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Updated 10 June 2024
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Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth

  • Vision 2030 envisions the Kingdom as a formidable player in space exploration and technology

RIYADH: Space exploration has transitioned from being solely government-driven to becoming an essential element of our everyday lives, significantly enhancing our quality of life. 

Saudi Arabia is charting a course toward the stars, propelled by an audacious vision that extends far beyond terrestrial boundaries. Vision 2030 envisions the Kingdom as a formidable player in the global arena of space exploration and technology. 

In an interview with Arab News, Amar Vora, head of space at Serco Middle East, noted that the genesis of Saudi Arabia’s cosmic aspirations can be traced back to 1985, with the historic journey of Saudi Prince Sultan bin Salman Al-Saud and the launch of Arabsat-1A. 

“Let’s not forget the impressive achievements of the King Abdulaziz City for Science and Technology, which has been helping to shape the national vision in space, building up knowledge, capacity, and infrastructure for over 20 years,” he said. 

Vora highlighted the 17 satellites launched by KACST since 2000, along with the Saudi Space Agency’s formation from the Saudi Space Commission.  

He added: “Space endeavors are no longer an exclusive playground for government; it is increasingly becoming a key component of our day-to-day lives, positively impacting our quality of life.”

Pioneering achievements 

Saudi Arabia’s journey into space began decades ago, and since then, the Kingdom has achieved remarkable milestones. 

Notably, the landmark partnership with Axiom Space marked a significant milestone, as astronauts Rayyanah Barnawi and Ali Al-Qarni embarked on the Ax-2 mission to the International Space Station in 2023.  

Barnawi became the first Saudi woman to journey into space, symbolizing Saudi Arabia’s commitment to gender equality and inclusivity in the realm of space exploration. 

Commenting on this endeavor, Vora said: “Of course, the Ax-2 mission provided the space community with a flavor of what’s to come from KSA’s space ambitions, becoming one of only a few countries to have achieved human spaceflight, and that in record time since the Saudi space decree was ratified!” 

He went on saying that partnerships with companies like Axiom Space “that are transforming and democratizing access to human spaceflight, highlight the ability of CST and SSA to capitalize on innovative solutions and services in the market.” 

Vora commended Barnawi’s efforts and said that this “is what we should come to expect from the Saudi and the global space sector. This is a sector that provides equitable representation and inspires and encourages engagement from people of all backgrounds and genders.”

Saudi Space Agency 

The Saudi Space Agency oversees the formulation and execution of the National Space Strategy, aimed at positioning the Kingdom as a leading spacefaring nation. 

Vora explained: “In doing so, SSA will be required to develop national capabilities in space, across the space value chain, from upstream (satellite systems and technologies), midstream (ground systems and operations), to downstream (data management and value-added services). The agency will also be responsible for promoting the uptake of space data across government and industries.” 

According to the top official, these advancements necessitate industry support for design, delivery, and operation, giving the agency a mandate to foster private sector expansion. 

This entails partnerships and investments with companies of varying sizes and backgrounds, both domestic and international, facilitated by the establishment of the National Space Co. 

“In implementing the strategic vision, SSA also has a key role to collaborate with international partners, leveraging international and long-standing experience and capabilities, with mutual interests in achieving scientific excellence,” Vora said.

Ambitions beyond earth 

Yet, Saudi Arabia’s cosmic ambitions extend far beyond the confines of earth’s atmosphere. 

With plans to develop a robust astronaut corps, participate in lunar exploration missions, and foster a thriving commercial space sector, the Kingdom is poised to carve out a formidable presence in the cosmos. 

Saudi Arabia is set to play a crucial role in the entire space value chain, focusing on localizing satellite technology production, enhancing space situational awareness, and utilizing space data for various sectors, including climate-related initiatives, according to Serco. 

A new report by the World Economic Forum predicts that the global space economy could reach $1.8 trillion by 2035, rivaling the semiconductor industry.  

Space technologies, like communications and earth observation, are expected to become as integral to daily life as semiconductors. 

The report emphasized that space will increasingly connect people and goods across industries, with benefits extending beyond financial gains to include addressing global challenges. 

Space endeavors are no longer an exclusive playground for government; it is increasingly becoming a key component of our day-to-day lives.

Amar Vora, head of space at Serco Middle East

“Intensified collaboration between diverse stakeholders from the public and private sectors will be key to unlocking and maximizing the industry’s exponential potential for years to come,” it added. 

From satellite manufacturing to space tourism, the Kingdom is primed to capitalize on the burgeoning space industry, diversifying its economy and driving innovation. 

Abdullah Al-Dawsari, who is an aerospace and defense project manager, told Arab News that “Saudi Arabia has the opportunity to leapfrog in key emerging areas of the space economy.” 

He said that this could be done through “strategically investing in next-generation capabilities by developing advanced satellite manufacturing using robotics, 3D printing, modular designs, offering low-cost launch services and rocket manufacturing by innovating in materials, propulsion, and reusability.” 

He added: “Providing innovative incentives like grants, tax benefits, and funding opportunities for research and development in the space sector and removing bureaucratic barriers can further stimulate the industry.” 

“Ultimately, space is becoming a cornerstone for economic growth, and this is exactly the vision and direction we are seeing from Saudi’s recent strides in space,” Serco’s top official said. 

The economic benefits of space exploration are manifold, according to Vora. Space technologies and data are critical assets for numerous industries, including agriculture, mobility, environment, defense, and many others.  

“We are seeing that space-enabled services have a role in the Saudi giga projects; for example, we see increased awareness, interest, and uptake from NEOM, Red Sea Global, and others,” he said. 

Economist and policy adviser, Mahmoud Khairy, said in an interview with Arab News that Saudi Arabia’s endeavors in space “isn’t just about reaching for the stars; it’s about building a smarter economy.” 

He added: “By venturing into space, Saudi Arabia aims to not only boost its global standing but also inspire young Saudis to pursue careers in science and tech. It’s all part of a bigger plan to transform the economy, putting the Kingdom on the map as a leader in space exploration while paving the way for a brighter, more sustainable future.”

Regulatory framework  

The Communications and Space Technology Commission has recently released regulations and a permit application to encourage private sector involvement in the earth observation services market. This initiative aims to boost GDP through value-added products. 

The initiative will grant permits to entities establishing EO platforms, facilitating data collection and processing. The documents outline requirements for applicants and emphasize user rights and data security. Interested parties are encouraged to review and apply for the permit.   

Key initiatives, such as the Center of Excellence for Earth and Space Science and the Center of Excellence for Aeronautics and Astronautics, underscore Saudi Arabia’s commitment to fostering world-class capabilities in space technology and research.  

Moreover, strategic partnerships with leading space agencies and organizations propel the Kingdom’s space aspirations to new heights. 

Vora emphasized that “strategic partnerships are essential in realizing the vision of the space sector in Saudi Arabia.” 

Saudi Arabia’s endeavors in space isn’t just about reaching for the stars; it’s about building a smarter economy.

Mahmoud Khairy, economist and policy adviser

He added: “For an emerging space-faring nation, partnerships enable effective knowledge transfer and opportunities to learn from past successes and failures. It allows the ability to share resources, risk, and infrastructure, advance scientific and technological research, and gain access to state-of-the-art innovations from a global ecosystem.” 

Vora explained that the most famous and widely referenced example of international partnerships and collaboration is the International Space Station, where it showcases the benefits of national collaboration. 

He went to say: “Private space companies providing both B2G (business to government) and B2B (business to business) services are now the norm, along with the utilization of space data-driven solutions across adjacent industries.” 

He went on explaining that this can be done by “introducing advanced technologies and services such as high-resolution imaging, data analytics for climate monitoring, urban planning solutions, and defense and security applications.” 

Al-Dawsari added: “Private companies, with their flexibility and innovative approaches, can significantly contribute to the space industry.” 

Private sector involvement in Saudi Arabia’s space industry has key implications for economic growth. It drives innovation, creates jobs, and attracts foreign investment, enhancing the Kingdom’s global competitiveness, according to Khairy.

A unique cosmic identity 

Beyond scientific and economic gains, Saudi Arabia’s cosmic journey holds profound societal implications.  

By inspiring the next generation of scientists, engineers, and explorers, the Kingdom is cultivating a legacy of innovation and discovery that transcends borders.  

“Beyond the clear economic benefits of Saudi’s endeavors in space, it undoubtedly has an impact on society,” Vora noted. 

National space endeavors along with international collaboration provides a catalyst for engagement in STEM fields through inspiration and integration into education, he highlighted. 

Vora added: “It’s great to see the mandate imposed by KSA last year to integrate space and earth sciences into secondary education curricula.” 

As Saudi Arabia ventures into space, the Kingdom remains committed to promoting sustainability and responsible stewardship of the cosmos.  

Sustainability comes in various forms in relation to Saudi’s space policy, according to Vora. 

“First, it’s KSA’s vision to create a sustainable, localized space industry and ecosystem — this requires support from the government in establishing an industry with long-term market opportunities,” he explained.  

Vora went on saying: “It’s how the national space program contributes toward Saudi’s vision to be a leader in environmental and climate sustainability. It’s what I call sustainability from space.”  

As space access becomes easier and launches more frequent, our space environment faces congestion and the risk of debris colliding with satellites. Improved technologies, regulations, and in-orbit solutions are needed to monitor and mitigate space debris.  

“Saudi space policy demonstrates leadership in this domain, enhancing the Kingdom’s role in the sustainability of space through investment in technologies to track and monitor space debris,” Vora emphasized. 

Khairy highlighted that space exploration requires a “whole army” of experts, from scientists and engineers to technicians and support staff.  

“As the space industry grows, so does the need for all sorts of services, from manufacturing to transportation. That means more jobs for Saudis across the board,” he added.

Sovereign wealth funds 

The pivotal role of sovereign wealth funds has become increasingly apparent in recent times, particularly in the Middle East.  

They have spearheaded economic diversification efforts, as reported by Euroconsult, a consulting firm specializing in the space sector. 

The report added: “Prominent funds like the UAE-based Mubadala Investment Company, the Saudi Public Investment Fund (PIF), and the Oman Investment Authority (OIA) have allocated substantial resources to finance local, regional and international space projects and companies.” 

Notable examples include partnerships like the one between Saudi Telecom Co. and PIF to establish IoT Squared, a technology firm specializing in the Internet of Things, as well as OIA’s acquisition of an equity stake in SpaceX. 

These investments not only support local, regional, and international space projects and companies but also bring tangible benefits to the countries involved, the report added. 

Economist Khairy said that the PIF is “already planning to invest heavily in the space sector and could be a major player in funding the Kingdom’s space dreams.” 

He added: “With its hefty financial resources and focus on long-term investments, it could provide the cash needed to launch satellites, conduct research, and build space infrastructure. Plus, investing in space could boost Saudi Arabia’s global reputation and competitiveness, drawing in even more investment and talent.” 

“When Saudi Arabia aims for the stars, it’s not just about the thrill of discovery; it’s about building a brighter economic future right here at home,” Khairy concluded. 


Egypt’s Connect Money gets ready to land in Saudi Arabia

Updated 17 sec ago
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Egypt’s Connect Money gets ready to land in Saudi Arabia

  • Firm officially planning to enter the Saudi market by mid-year 2025

RIYADH: Saudi Arabia’s fintech growth has grabbed the attention of Egypt’s Connect Money as the company commences its expansion plan.

Founded this year by Ayman Essawy, Marwan Kenawy, and Momtaz Moussa, Connect Money provides a white-label card issuing platform that allows businesses to offer debit and credit cards to their customers without building fintech infrastructure or securing regulatory licenses.

In an interview with Arab News, Essawy, the company’s CEO, stated that Connect Money is officially planning to enter the Saudi market by mid-year 2025 and will then aim to expand to Morocco.

“We see a very big opportunity toward expansion, especially in Saudi Arabia and Morocco. Saudi Arabia is one of the hot topics in the region and fintech is growing significantly,” he said.

“We have strong connections with the whole Saudi ecosystem, and we have built a good relationship with the regulators and leading financial providers there and partner banks,” he added.

“We found that there is a need for our services to further accelerate fintech growth in Saudi Arabia,” Essawy claimed.

The CEO further said that once the expansion to Saudi Arabia begins, 80 to 90 percent of the company’s focus will be dedicated toward the Kingdom.

“We have spent the last 10 years operating on the business-to-business side in our past ventures and we claim to have very good market understanding across different sectors,” he added.

He further claims that after operating in Saudi Arabia for seven years at his first venture, Dsquares, the founder was able to carefully identify the market gaps in the financial industry.

The CEO also takes pride in being a serial entrepreneur and the founder of Egypt’s largest coupon platform Lucky ONE.

A problem to solve

Essawy explained that the company solves three critical problems for any large enterprise planning to incorporate strong fintech solutions internally.

He cited “very long compliance and regulatory cycles” for these companies as an issue, adding: “These cycles occur because they do not have the capability to build an infrastructure since they already operate a core business be it telecom, logistics, and even oil and gas.”

The CEO went on to say: “Second is the very high cost of building the infrastructure, so first, it takes a very long time to get granted a license and second is that there’s a very high cost for building and operating this part of the business.” 

We have spent the last 10 years operating on the business-to-business side in our past ventures and we claim to have very good market understanding across different sectors.

Ayman Essawy, Connect Money CEO

Thirdly, Essawy explained that these entities usually look for reasons to turn cash users into cashless, a value-added service that Connect Money provides.

When asked why companies would even pursue such a solution, Essawy replied: “It’s one of two things. First, operational efficiencies, so turning cash cycles, which is very expensive in terms of efficiency and makes the business operational cycle much longer, cost of actually collecting cash or disbursing cash is already high.  “So, turning this operational role or operational service into a cashless service, and that happens through issuing white-label cards.”

He added: “Second is generating new revenue streams. These come from banking services such as transactions, credit, providing credit to businesses, basically financing with businesses and so on.” 

Essawy further said that the solution provided by Connect Money is basically putting all these services into a “one-stop shop” for embedded finance.

“This shop comes from getting the right approvals from regulators, issuing white-label cards, and providing a full managed service on top of that, as if I’m creating your small bank for your company,” he said.

The CEO cited the ride-hailing giant Uber as an example, stating that the solution would give the global company a small bank for its drivers to manage, open, and issue cards as well as create accounts and put incentives.

“This solution would be completely managed by Connect Money, yet the client has full ownership of the service,” he added. “Basically, as a company, you own the customers, you own the operations, and you own everything legally, but Connect Money is managing them on your behalf,” he explained.

The company has already incorporated itself into the Kingdom’s market and will soon announce the hiring of its Saudi-based founding member to lead the local office.

Business fundamentals

Connect Money has already seen significant traction in Egypt, landing eight contracts in under a year of operation. The company also has a 10-week go-to-market plan to onboard clients.

Essawy also stated that the company is currently the sole provider of such services in the region, but the founder also expects competition to increase as the market scales.

The founder explained that Saudi Arabia holds a different market segmentation, and that there is a misconception that the nation only consists of high-value customers.

“There is a lot to be tackled in the mid layers with the hyper growth that is taking place in the Kingdom,” he added.

“We believe that there is a significant opportunity for new segments and new mid-sized businesses that would require our services. We still believe that there is still a big gap between cash and cashless transactions which we aim to bridge,” he added.

He further emphasized that the market dynamics are almost completely different from Egypt.

Essawy also shared his view on the growing number of Egyptian companies expanding to Saudi Arabia, saying: “I’ve seen many companies expand to Saudi Arabia as a first choice and I don’t think this is a wise decision.”

He added: “I think each business model is dependent on what’s the end goal and where you can scale. In Saudi Arabia, you’ll find business but you’ll also find an expensive working environment.”

He further advises any company expanding to Saudi Arabia to reexamine their margins and growth pace before taking that step.


Saudi aviation sector soaring after record growth, major expansions

Updated 03 January 2025
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Saudi aviation sector soaring after record growth, major expansions

JEDDAH: Saudi Arabia’s aviation sector reached new heights over the past 12 months, marked by a surge in passenger numbers, a fleet expansion with new jet acquisitions, and strategic global partnerships.

These advancements are part of a broader vision to establish the Kingdom as a global aviation hub and a top-tier destination for travelers worldwide.

Saudi Arabia is investing billions of dollars as part of its Vision 2030 plan to diversify its economy away from fossil fuels, boosting its private sector, and enhancing connectivity, as well as solidifying its role in the global aviation industry.

As part of this plan, aviation goals for the Kingdom include delivering seamless experiences to 330 million passengers across over 250 destinations, and the transportation of 4.5 million tons of air cargo by 2030.

“This transformative strategy offers lucrative opportunities for the private sector to contribute to the realization of the country’s ambitions,” said President of the General Authority of Civil Aviation Abdulaziz bin Abdullah Al-Duailej.

He added that among these opportunities are the privatization potential of 27 airports, which are currently in preparation for transfer to private ownership.

“Moreover, numerous aircraft requests and destination openings have been approved, providing further avenues for private sector involvement in the sector’s growth and development.” Al-Duailej added.

Passenger numbers and air freight volume surges

Between January and September, Saudi Arabia’s aviation sector achieved record growth, with passenger numbers reaching 94 million, accounting for a 15 percent increase.

The number of flights also saw a 10 percent rise compared to 2023, while air freight volumes approached 1 million tonnes, reflecting a 52 percent increase.

These achievements were announced at GACA’s 14th Steering Committee Meeting for activating the National Strategy for the Aviation Sector, held in October in Dammam.

GACA President Abdulaziz bin Al-Duailej highlighted the expansion of air connectivity during this period, with flights departing to over 150 destinations weekly.

Saudi business aviation soars with Vision 2030 growth

Saudi Arabia’s business aviation sector is booming, driven by the Kingdom’s expanding economy, major government infrastructure investments, and a rising influx of high-net-worth individuals.

Valued at $1.2 billion in 2023, the sector is expected to grow at a compound annual rate of 8.88 percent from 2025 to 2029.

The growth was highlighted in the GACA’s roadmap, unveiled at Riyadh’s Future Aviation Forum in May.

Global firms tapped for King Salman Airport expansion

An image of how King Salman International Airport will look after it has been developed. File

In 2024, global firms such as Foster & Partners, Jacobs Engineering, Mace, and Nera were selected for the next phase of King Salman International Airport’s development in Riyadh.

Led by the King Salman International Airport Development Co., a subsidiary of the Kingdom’s Public Investment Fund, the collaborations will support the airport’s expansion, positioning it as a key hub for tourism and transportation.

Riyadh Air expands fleet, partnerships ahead of 2025 launch

In October, Riyadh Air signed an agreement to purchase 60 Airbus A321neo single-aisle aircraft as it plans to commence its operations in 2025. 

The deal was signed at the 8th Future Investment Initiative in Riyadh.

In the same month the company said that it had plans to order wide-body aircraft capable of seating more than 300 passengers in 2025.

In August, the new airline announced it had secured a multi-year agreement to become the official airline partner of Concacaf, the FIFA Confederation for North, Central America, and the Caribbean.

The deal aims to enhance the airline’s presence in global sports and support Concacaf’s national and club competitions across the Americas. 

In June, Riyadh Air signed agreements with Singapore Airlines and Air China, to establish strategic partnerships and expand its global network.

The agreements focus on interline connectivity, codeshare, frequent flyer programs, cargo services, customer experience, and digital innovation.

The company partnered with China Eastern Airlines to enhance connectivity and digital transformation and with Delta Air Lines to expand North American routes.

In April, the carrier announced a partnership with Artefact to build a data analytics platform and develop AI solutions, enabling hyper-personalization, improved guest experiences, and optimized operations. 

The collaboration aims to revolutionize Saudi aviation through advanced artificial intelligence applications.

“Through AI integration, we aim to redefine travel standards, offering personalized, seamless digital-first experience to our guests ahead of our maiden flight in 2025,” Abe Dev, the airline’s vice president of digital and innovation said.

In May, the airline said it had plans to bolster its aircraft lineup through additional orders, as it requires “a very large fleet” to establish itself alongside regional giants, according to its CEO Tony Douglas.

This move comes as the Kingdom’s second flag carrier ordered 39 Boeing 787-9 jets in 2023, with options for 33 more. “We’re going to make a number of additional orders,” Douglas said.

The airline’s initial destinations will include major cities in Europe, the US East Coast, and Canada, with the inaugural flight scheduled to depart by June 2025.

Saudia boosts aviation with key partnerships, fleet growth

The signing ceremony was attended by French President Emmanuel Macron, Saudi Arabian Airlines Corp. Chairman Saleh Al-Jasser, Saudia Group Director Gen. Ibrahim Al-Omar, and several other dignitaries and ministers. SPA

In December, Saudia entered a strategic partnership with Air France-KLM to expand and localize its maintenance, repair, and overhaul capabilities. This collaboration aims to enhance the Kingdom’s aviation infrastructure and contribute to its economic growth.

In July, the Saudia Group and German aerospace company Lilium NV, developer of fully electric vertical takeoff and landing aircraft, entered into an agreement to purchase 50 confirmed Lilium Jets, with an option for an additional 50 aircraft. The deal will make the Saudi carrier the first airline in the region to invest in sustainable air mobility.

In May, Saudia and Riyadh Air signed an agreement during the Future Aviation Forum to collaborate on training aviation professionals.

During the same event, Saudia Group announced a $19 billion order for 105 A320neo family aircraft, the largest Airbus deal in Saudi history. The planes, including A320neo and A321neo models, will be split between Saudia and its low-cost carrier flyadeal, with deliveries starting in early 2026.

Flyadeal receives first owned plane, aims for 100 by 2030

In 2024, Saudia’s low-cost airline flyadeal took delivery of its first wholly-owned aircraft, an Airbus A320neo.

Announcing the milestone in June, the airline revealed plans to expand its fleet to around 50 aircraft by the end of 2025, doubling to 100 by 2030. As part of its growth strategy, flyadeal also launched seven weekly flights between Riyadh and Sarajevo, utilizing an Airbus A320.

Looking ahead, the airline announced the addition of three new domestic routes starting January. Services from Dammam to Najran and four weekly flights to Tabuk commenced on Jan. 1, followed by three weekly flights to Yanbu starting from Jan. 2.

Flynas secures 280-aircraft deal amid record growth

Flynas, named the Best Low-Cost Airline in the Middle East for the seventh consecutive year, reported a 47 percent rise in passenger numbers, exceeding 7 million in the first half of 2024.

In November, the airline announced new African routes, with flights from Riyadh to Entebbe, Uganda, and Jeddah to Djibouti starting Jan. 8, 2025, under its “We Connect the World to the Kingdom” initiative.

In July, Flynas signed a deal at the Farnborough Airshow to purchase 160 Airbus aircraft, doubling its orders to 280 planes, including 30 wide-body A330neo and 130 narrow-body A320 models. The carrier also celebrated receiving its 53rd A320neo as part of a SR32 billion ($8.5 billion) order for 120 planes.


Saudi banks’ money supply hits $786bn, time and savings deposits share at 15-year high

Updated 03 January 2025
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Saudi banks’ money supply hits $786bn, time and savings deposits share at 15-year high

RIYADH: Saudi banks money supply reached SR2.95 trillion ($785.51 billion) in November, marking a 10.3 percent rise compared to the same month last year, according to official data.

Figures released by the Saudi Central Bank, also known as SAMA, revealed that time and savings deposits have reached their highest percentage share of the money supply in over 15 years, accounting for 33.61 percent or SR989.99 billion.

These deposits also recorded the fastest growth rate among all components of the money supply, increasing by 18.10 percent.

Demand deposits accounted for the largest share at 48.76 percent, a slight decline from their 50 percent share a year earlier, though they grew by 7.69 percent during this period. The remaining components collectively made up 17.63 percent of the total money supply.

Edmond Christou, senior industry analyst at Bloomberg Intelligence told Arab News, “Local lenders’ role in financing projects requires more cash, underpinning the likes of Saudi Fransi, ANB, Rajhi and SNB issuing euro-denominated medium-term notes.”

He added: “Saudi central bank putting state funds on time deposits helped bank cash flow, along with open market operations and $31 billion of debt sales since 2022 or $25 billion excluding SNB’s CDS.” 

According to the analyst, this surge in term deposits is a development driven by tighter liquidity conditions and elevated interest rates. The rise reflects strategic measures by local banks to navigate strong loan demand while attracting funds to stabilize their balance sheets.

Recent data from SAMA revealed that deposit growth is slightly behind loan issuance, putting some pressure on liquidity. Loans grew 13.33 percent year-on-year in November, outpacing the 10.52 percent increase in deposits. This imbalance has pushed banks to compete for depositors by offering attractive returns on term deposits.

Saudi Arabia has been driving substantial government projects to support its Vision 2030 ambitions, with a heavy emphasis on construction activity to transform its infrastructure, tourism, and overall economic landscape.

These projects, ranging from mega cities like NEOM to significant infrastructure developments, require vast amounts of funding, and banks have played a crucial role in financing them. To support these large-scale endeavors, the demand for credit has surged.

Interest rates in Saudi Arabia also reached elevated levels, partly due to the riyal’s peg to the US dollar, which has been influenced by the Federal Reserve’s tightening monetary policy aimed at combating inflation.

This led to a peak in interest rates, which climbed to as high as 6 percent. However, as inflation levels have moderated, there has been a shift in the monetary policy since September, with SAMA implementing three rate cuts — one of 50 basis points, followed by two additional 25 basis point reductions.

This shift signals a more accommodating policy stance, likely to ease some of the pressure on borrowing costs while maintaining financial stability.

The rise in term deposits underscores a shift in the Saudi banking sector’s approach to funding. Banks are incentivizing savers with higher returns to ensure stability, particularly as demand for credit grows due to Saudi Arabia’s ambitious Vision 2030 projects.

Term deposits provide a more predictable funding source compared to demand accounts, which can fluctuate significantly. The strategic shift helps banks align their funding structure with long-term lending requirements, particularly for infrastructure and construction projects.

Higher Saibor spread to boost funding

The elevated 115-basis point spread between the Saudi Interbank Offered Rate, known as Saibor, and the US Secured Overnight Financing Rate illustrates the tight liquidity landscape, according to Christou.

A higher Saibor compared to SOFR means that borrowing and funding costs in Saudi Arabia are relatively higher than those in the US. Historically, this spread hovered around 70 basis points, but sustained demand for credit has kept it significantly higher.

“The 115-bp Saibor spread over the secured overnight financing rate versus the normalized 70-bp historical range -nevertheless an improvement against the 2022 liquidity crisis – shows liquidity remains tight,” the analyst said.

In an environment where deposit inflows remain moderate, banks have also turned to external borrowing, including issuing euro-denominated bonds, to bridge funding gaps.

Local lenders like Al Rajhi Bank, Saudi National Bank, and Banque Saudi Fransi have leveraged such instruments to support their liquidity needs, according to the analyst.

While liquidity remains constrained, the current environment is an improvement over 2022 according to the analyst, when Saudi banks faced acute pressures due to surging credit demand.

SAMA’s debt issuance of over $31 billion since 2022, combined with other supportive measures, has alleviated some of the strain. However, the banking sector must continue to address systemic challenges to sustain long-term growth, Christou said.

Loan-to-Deposit ratio below limit

The loan-to-deposit ratio in Saudi banks has remained steady at 82.16 percent in November, despite the fact that loans grew by over 13 percent annually, which outpaced the deposits growth over the same period.

The LDR is a key indicator used by banks to measure the proportion of loans granted compared to the deposits they hold. In this case, even though the demand for loans has increased at a faster pace than deposit growth, the ratio has stayed below the regulatory limit of 90 percent.

The stability in the LDR is likely due to support from other sources of funding, such as debt issuance and private placements. These alternative funding methods have helped banks maintain their liquidity and ensure they can continue to lend without being overly reliant on deposits, according to Christou.

According to a June report by the International Monetary Fund, the Saudi banking sector is resilient, with stress tests indicating that both banks and non-financial businesses can withstand shocks, even in challenging scenarios.

However, close attention is needed to balance credit growth, funding, and systemic risks, especially as large-scale government projects under Vision 2030 accelerate.

While banks are well-capitalized, profitable, and maintain high liquidity with low nonperforming loans, there are potential risks tied to fast credit growth and the increasing reliance on non-deposit funding sources.

To manage these risks, SAMA may need to adjust its policies, such as revisiting loan-to-value limits, debt burden guidelines, and loan-to-deposit ratios.

Enhanced tools, like a countercyclical capital buffer, can also help prepare for future challenges. Moreover, better monitoring — such as tracking house prices and bank exposures to large projects — would provide a clearer picture of risks.


Oil Updates — crude set for weekly gains on colder weather, Chinese policy support

Updated 03 January 2025
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Oil Updates — crude set for weekly gains on colder weather, Chinese policy support

LONDON: Oil prices held steady on Friday, remaining poised for weekly gains after closing the previous session at their highest in more than two months, underpinned by colder European and US weather and additional economic stimulus flagged by China.

Brent crude futures were up 22 cents at $76.15 a barrel by 5:37 p.m. Saudi time after settling on Thursday at the highest level since Oct. 25. US West Texas Intermediate crude gained 44 cents, or 0.6 percent, to $73.57.

Brent was on track for a 2.7 percent weekly gain while WTI was set for a 4.2 percent increase.

Signs of Chinese economic fragility heightened expectations of policy measures to boost growth in the world’s top oil importer.

“As China’s economic trajectory is poised to play a pivotal role in 2025, hopes are pinned on government stimulus measures to drive increased consumption and bolster oil demand growth in the months ahead,” said StoneX analyst Alex Hodes.

China announced a couple of new measures to boost growth this week with a surprise move to raise wages for government workers and the announcement of a sharp increase in funding from ultra-long treasury bonds. The additional funding is to be used to spur business investment and consumer-boosting initiatives.

Oil is likely to have gained some price support from expected increased demand for heating oil after forecasts for colder weather in some regions.

“Oil demand is likely benefiting from cold temperatures across Europe and the US,” said UBS analyst Giovanni Staunovo.

Also supporting prices this week, US crude stockpiles dropped by 1.2 million barrels to 415.6 million barrels, EIA data showed.

Meanwhile, US gasoline and distillate inventories jumped as refineries ramped up output, though fuel demand hit a two-year low. 


Saudi Arabia closes $2.5bn Shariah-compliant credit facility for budget financing

Updated 03 January 2025
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Saudi Arabia closes $2.5bn Shariah-compliant credit facility for budget financing

RIYADH: The National Debt Management Center has announced the successful arrangement of a Shariah-compliant revolving credit facility valued at SR9.4 billion ($2.5 billion).

This three-year facility is intended to support the Kingdom’s general budgetary requirements and was secured with the participation of three regional and international financial institutions.

This credit arrangement is in line with Saudi Arabia’s medium-term public debt strategy. It aims to diversify funding sources to meet financing needs at competitive terms, while adhering to robust risk management frameworks and the approved annual borrowing plan.

In November, Saudi Arabia approved its state budget for the fiscal year 2025, with projected revenues of SR1.18 trillion and expenditures totaling SR1.28 trillion, resulting in a deficit of SR101 billion.

The Finance Ministry forecasts a robust 4.6 percent growth in the Kingdom's real gross domestic product for 2025, a significant increase from the 0.8 percent growth expected in 2024. This growth is anticipated to be driven by a rise in activities within the non-oil sector, according to the ministry’s statement.

Saudi Arabia’s total debt is projected to reach SR1.3 trillion in 2025, or 29.9 percent of GDP, which is considered a sustainable level to meet the country’s financing needs.

Revised projections for the 2024 budget indicate a deficit of SR115 billion, with total debt expected to rise to SR1.2 trillion, or 29.3 percent of GDP.

The 2025 budget places a strong emphasis on maintaining essential services for citizens and residents while increasing investment in key projects and sectors. The government's focus remains on preserving fiscal stability, ensuring long-term sustainability, and managing reserves effectively. By maintaining manageable debt levels, Saudi Arabia aims to safeguard its resilience against unforeseen economic challenges.