Kuwaiti banks witness 1.1% surge in deposits

KUWAIT CITY, Dec 14: During the first 11 months of this year, local banks experienced a notable surge in their accounts and deposits at the Central Bank of Kuwait, marking a 1.1 percent increase, equivalent to approximately 56 million dinars. The total rose from 5.71 billion dinars in December 2022 to 5.128 billion dinars by the end of November. However, on an annual basis, these accounts and deposits saw a significant decline of 5.5 percent, totaling 299.3 million dinars, compared to 5.427 billion dinars at the end of November 2023.

Concurrently, the Central Bank’s issuance of bond offerings and corresponding tawarruq experienced a growth of 2.6 percent, reaching 210 million dinars during the 11 months of the current year compared to the same period last year. The Central Bank launched 38 issues with a combined value of 8.2 billion dinars, covered by banks approximately 12 times, with a total value of 98.7 billion dinars. This compares to 35 issues in the same period of 2022 with a total value of 8.02 billion dinars, covered by banks at a ratio of 11.3 percent, with a total value of 90.7 billion dinars.

Banks are exhibiting an increased demand to boost their deposits and accounts with the Central Bank, as well as acquiring Central Bank bonds. This demand stems from the ample liquidity enjoyed by banks, resulting from the substantial volume of deposits amid limited investment channels. This scarcity arises, particularly with the notable surge in inflation in asset prices over the last two years due to the rise in interest rates by the US Federal Reserve, followed by most central banks globally.

In 2022, the discount rate increased seven times, reflecting the Central Bank of Kuwait’s effort to enhance cash flow within the banking sector and the national economy. Simultaneously, this strategy aims to sustain the appeal of the Kuwaiti dinar as a lucrative and reliable savings vessel and keep pace with interest rate hikes by the US Federal Reserve. The discount rate rose from 1.50% to 3.50% on December 7th. In 2023, the Central Bank continued its monetary policy adjustments. Last January, the discount rate increased by half a percentage point to 4.0%, and in August, it rose by 25 basis points to 4.25%.

By Ahmad Fathi
Al-Seyassah/Arab Times Staff