Annual growth in Saudi Arabia's money supply fell for a third month in January to 13.87 percent from 17.65 percent in December despite recent aggressive interest rate cuts.

The Saudi Arabian Monetary Agency's net foreign assets fell by around 1.6 percent in January from December, their sharpest month-to-month fall in at least 12 months.

The net figure was some 1.62 trillion riyals in January compared with about 1.2 trillion riyals a year earlier, the data, posted on Sama's website, showed. But compared with their levels in recent months, Sama's net foreign assets in January were at their lowest level since August.

Sama did not explain the drop. Saudi officials have repeatedly said the world's top oil exporter was not stung as badly as other states by the global crisis because it sustained a policy of "very liquid, very safe, minimal risk" international assets.

Sama's monthly report said M3, the broadest measure of money circulating in the economy, climbed to 928.17 billion riyals ($247.5 billion) in January compared with 815.14 billion riyals a year earlier.

Compared to its level in December, M3 inched down 0.1 percent in January, the first decline since April. The slight decrease reflected a 4.3 percent month-to-month drop in time and savings deposits, the data showed.

Sama has eased bank lending restrictions and slashed interest rates by more than half since October in an effort to encourage banks to keep lending amid both easing inflationary pressures domestically and a global credit crisis.

But bank claims on the private sector, an indicator of business confidence, slipped for the third month in a row to 729.44 billion riyals from 734.56 billion riyals in December and 743.05 billion riyals in November.

Analysts were expecting Sama's net foreign assets to show signs of weakness given that oil prices have tumbled to less than a third of their record high above $147 a barrel last July.

In a breakdown of Sama's assets, the data showed the Saudi central bank reduced deposits with banks abroad to 353.29 billion riyals in January from 379.49 billion riyals in December and 384.36 billion riyals in November.

At 1.15 trillion riyals in January, Sama's investment in foreign securities was almost unchanged from December but was still below the 1.17 trillion riyals level of November. - Reuters