Saudi Arabian Monetary Authority (Sama) sees no need for further steps to boost banking liquidity as the cash crunch that affected banks in the kingdom last year is over, according to its Governor Ahmed Alkholifey.

The drop in oil prices from the mid-2014 peak of $115 a barrel, squeezed government revenues, forcing it to borrow from the domestic debt market and draw down on its deposits in the banking system, which resulted in severe shortage of liquidity.

Sama responded by injecting billions of riyals into the banking system and deploying other monetary policy tools to ease the strain. Authorities also sold the biggest ever bond from an emerging market in October and cut weekly domestic debt issuance.

“We had to intervene,” according to news agency Bloomberg, which cited Alkholifey as saying in an interview in Davos. The central bank is now comfortable with current liquidity levels “and I don’t think we need to intervene anymore,” he said.

The government has also repaid more than SR270bn owed to contractors after halting payments because of the slump in crude, Finance Minister Mohammed Al-Jadaan said in December.

Alkholifey, without naming any company, said any defaults in the construction industry won’t be “systematic.”

“The exposure of the whole banking sector to the construction sector is less than 8 per cent of total loans,” he added.

Foreign lenders

Sama is reviewing one licensing application from a regional lender and is open to requests from other foreign banks. The central bank has recently approved a request by Bank of Tokyo-Mitsubishi to operate in the kingdom.