Banks in the kingdom are facing a cash squeeze as the government withdraws deposits and sells local-currency debt to fund the budget deficit.  Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, expects to see further easing in the coming days, saying:

"We expect to see further measures, such as possibly reducing the reserve requirement ratio or increasing the loan-to-deposit ceiling in the coming days."

This announcement should come as no surprise to our readers (see "Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt").  The Saudi circular ref whereby "low oil prices -> budget deficits -> more oil pumping -> even lower oil prices" can only end badly.

An update of Saudi "stress" indicators implies the kingdom's situation has continued to deteriorate.  Short-term lending rates continue to gap higher indicating liquidity constraints...