Understanding Saudi Arabia’s M3 Money Supply
Saudi Arabia’s M3 money supply has surged 5.59 percent to SR2.63 billion ($700 billion) in the week ending June 8, up from SR2.5 billion on Dec. 31, according to data released by the Saudi Central Bank, also known as SAMA. The M3 money supply is the broadest measure of liquidity in the monetary system and is used by central banks to direct monetary policy, thereby controlling inflation, consumption, growth, and liquidity over medium- and long-term periods.
What is M3 Money Supply?
M3 money supply is a measure of the total amount of money in circulation in an economy. It includes all the components of M2 money supply (cash, checking deposits, and savings deposits) as well as large time deposits, institutional money market funds, and other liquid assets.
Why is M3 Money Supply Important?
M3 money supply is important because it provides an indication of the overall level of liquidity in an economy. When there is too much liquidity, it can lead to inflation, while too little liquidity can lead to a recession. Central banks use M3 money supply figures to direct monetary policy, thereby controlling inflation, consumption, growth, and liquidity over medium- and long-term periods.
M3 Money Supply in Saudi Arabia
The M3 money supply in Saudi Arabia has surged 5.59 percent to SR2.63 billion ($700 billion) in the week ending June 8, up from SR2.5 billion on Dec. 31. The SAMA data also revealed that the money supply in Saudi Arabia has been stable at SR2.6 billion in the past seven weeks.
M2 Money Supply in Saudi Arabia
The M2 money supply recorded a 5.04 percent rise in the week ending June 8 compared to Dec. 31. The M2 is a measurement of the nation’s money supply that estimates all the cash individuals have in hand or short-term bank deposits. It is usually used to indicate possible increases or decreases in inflation levels.
M1 Money Supply in Saudi Arabia
Meanwhile, the M1 money supply, comprising currency, demand and other liquid deposits, rose 1.46 percent in the week ending June 8 compared to the end of December 2022. The M1 money supply contains currency and assets that can be quickly converted to cash.
Conclusion
The M3 money supply is an important indicator of the overall level of liquidity in an economy. In Saudi Arabia, the M3 money supply has surged 5.59 percent to SR2.63 billion ($700 billion) in the week ending June 8, up from SR2.5 billion on Dec. 31. The M2 money supply recorded a 5.04 percent rise in the week ending June 8 compared to Dec. 31, while the M1 money supply rose 1.46 percent in the same period. Central banks use these figures to direct monetary policy, thereby controlling inflation, consumption, growth, and liquidity over medium- and long-term periods.