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Kuwait City: Kuwait injected cash into the financial system, bankers said on Monday, welcoming a move aimed at shoring up confidence in its banks as a deepening global financial crisis caused liquidity to tighten in Gulf states.
They said the Central Bank of Kuwait offered one-week and one-month funds to signal to markets it wanted to ensure there was sufficient liquidity after a recent slide in stocks on the Arab world's second-largest bourse.
"Volumes are relatively small but it is good news because they are signalling to the market that they are there and ready to pump liquidity if necessary," a banker at a local lender told Reuters. Others confirmed the move without providing volumes.
The central bank could not be reached for comment. It said last week it was ready to add liquidity if necessary despite worries about inflation.
Its move came as the fin-ancial crisis spread to Eur-ope and the Bank of England and the European Central Bank joined Asian authorities in pumping more cash into markets.
Kuwaiti banks fear the global crisis might affect them and had urged the government to boost deposits in private banks.
"We do not see a liquidity crisis. However, credit growth has... slowed. We expect this trend to continue going forward as deposits of the banking system grow at a slower pace than demand for credit," said Monica Malik, econ-omist at EFG-Hermes.
Kuwait has toughened lending rules to tackle soaring inflation, which hit an almost-record high of 11.35 per cent in June, but the central bank's Governor, Shaikh Salem Abdul Aziz Al Sabah, was quoted as saying he was confident that banks' loan business would not be hit.
Loans: Gulf interbank rates rise
Interbank lending rates in Saudi Arabia and the UAE rose yesterday as liquidity conditions tightened amid tensions ahead of a possible final US bailout agreement.
In Saudi Arabia, one-month rates hit 4.05750 per cent, continuing a steady increase than began in early May.
In the UAE, one-month rates rose to 4.18750 per cent compared with 3.95625 per cent on Sunday.
Last week, the UAE central bank said it would offer banks short-term funds through a Dh50 billion ($13.61 billion) facility in an emergency move to ease tensions in money markets as it sought to stave off the global credit crunch.
- Reuters
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