Saudi Arabian Monetary Authority (SAMA) has decided to inject SAR50bn ($13.3bn) into the banking system in the wake of challenges posed by the Covid-19 pandemic, Bloomberg has reported.

Due to the Covid-19 lockdowns and drop in oil prices, the country’s non-oil economy is expected to decline for the first time in over 30 years.

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In its Financial Stability Report published last week, SAMA said: “As a result of the virus outbreak, Saudi banks are expected to encounter a reduction in activities in 2020, which will reflect negatively on profitability and possibly increase defaults.”

SAMA, the central bank of the country, said that it will support the financial stability and boost credit facilities to the private sector, the report added.

The private sector financing programme was first introduced in March to help mostly the small private businesses in the country.

The latest programme, however, will help banks to amend and restructure loans without additional fees and also support employment.

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Bloomberg report added that the regulator also urged banks to put a lending programme in motion for at least six months to “assist in maintaining employment levels.”

Additionally, the government transferred SAR150bn ($40bn) from its reserves to finance an investment spree by its sovereign wealth fund Public Investment Fund (PIF).

As a result, SAMA’s official reserves may plunge to around $456bn this year, while continuing the trend into 2021 as well, according to the International Monetary Fund (IMF).

The central bank’s net foreign assets stood at $443bn as at the end of April this year 2020.