Interest rate margin supports the competitiveness of the Kuwaiti dinar
Banking sources confirmed that the strength and stability of the Kuwaiti dinar against major currencies are among the key factors of attraction that will continue to support its competitive position as a safe haven.
The sources clarified that the 0.5 percent interest rate margin in favor of the US dollar, following a 25-basis-point rate hike that brought the margin to a range of 3.75 to 4.0 percent, does not constitute a gap sufficient to encourage a shift toward the dollar as a deposit currency amid the current phase of instability and volatility driven by prevailing pressures and changing conditions.
They noted that the interest rate differential between the dinar and the dollar does not incentivize taking risks or bearing the price-difference risks associated with currency conversion.
They added that even under the most stable and competitive conditions for the dollar, the majority of deposits remain denominated in the Kuwaiti dinar, particularly given its long-standing stability, the lowest volatility among currencies, and its status as one of the safest currencies against speculative trading.
The sources explained that banks have a regulatory margin allowing them to operate up to 3 percent above the discount rate, enabling them to manage the narrowing of the interest rate gap based on real-world conditions, liquidity flow monitoring, and directional trends.
Resident deposit balances increased by 5.05 billion dinars, representing a 9.8 percent growth, according to July data, bringing total resident deposits to 56.48 billion dinars. This was supported by a rise in public institution deposits of approximately 2.88 billion dinars, a 43.6 percent increase, bringing their total to 9.50 billion dinars. It was also driven by an increase in government deposits of approximately 1.47 billion dinars, a 33.5 percent rise, bringing their total to 5.85 billion dinars. Meanwhile, resident private sector deposits increased by 1.7 percent, or about 700 million dinars, reaching 41.13 billion dinars.
• Total foreign assets held by local banks increased by 1.96 billion dinars, a 13.1 percent rise.
• The utilized portion of credit facilities increased by 2.48 billion dinars, a 4.8 percent rise.
In addition to all banking indicators and figures, it is worth noting the continued guarantee of deposits, a positive moral factor that further encourages and supports stability and resilience. Furthermore, the absolute majority of corporate transactions and operations are conducted in the Kuwaiti dinar, which further reinforces the stability of the trading margin in favor of the dinar, giving it a significant advantage over the next most commonly used currencies.
