$6.5 Billion in Loans Facilitating Stock Purchase by Companies and Institutions in Kuwait

The Impact of Kuwait Stock Exchange Decline on Credit Lines Granted by Banks

Credit Lines for Purchase of Securities

As a result of the Kuwait Stock Exchange declines since the beginning of the year and the significant drop in circulating liquidity, credit lines granted by Kuwaiti banks for the purchase of securities suffered successive declines. At the end of last April, credit lines reached the level of 3.23 billion dinars, which is equivalent to 10.4 billion dollars. This amount is decreased from the 3.33 billion dinars that were previously granted.

Total Loans for Purchase of Securities

The total loans for the purchase of securities granted to residents and non-residents, companies, and individuals, since the beginning of the year amounted to 60 million dinars, which is equivalent to 195 million dollars.

Credit Lines Breakdown

Credit lines for the purchase of securities are divided into two parts. The first part is intended for private individuals, whose share of the total credit lines amounts to 1.24 billion dinars, equivalent to 4.03 billion dollars. The rest of the facilities are granted to institutions and companies whose share of the loans was two billion dinars, equivalent to 6.5 billion dollars, at the end of last April. Data shows that businesses and institutions have captured the largest growth rates in the volume of these facilities from the share of private individuals, increasing by 19 million dinars, according to the Kuwaiti newspaper Al-Anbaa.

Central Bank of Kuwait Discount Rate

The Central Bank of Kuwait has raised the discount rate from its historical low of 1.5% to 4%, compared to the interest rate set by the Federal Reserve, which fluctuates between 5 and 5.25%.

Kuwait Stock Exchange Liquidity Wounds

Interestingly, the Kuwait Stock Exchange has experienced a decline in the volume of torrents traded since the inception of quest’year. The liquidity media daily for the first quarter of 2023 was about 43 million dinars, compared to 68 million dinars in the previous year. This decline in loans is expected to deepen the liquidity wounds of the stock market in the coming period.

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