Saudi Arabia has reported a decline in import letters of credit (L/Cs) opened in January 2013 compared with the same month last year.

However, the decline is mainly put down to very high levels of L/Cs used in 2012 in government contract awards and marks some substantial changes in the way L/Cs are being used in the Kingdom.

Statistics

The value of L/Cs opened in 2013 registered a 0.9 per cent decline in the month of January.

This is just the second decline in over a year. Apart from in October 2012, the month-on-month values of L/Cs opened in Saudi Arabia increased each month of last year compared with 2011.

Spending habits

But the relatively small 0.9 per cent decline masks some very substantial changes in the way Saudi Arabia is using L/Cs.

The value of L/Cs opened for imports substantially used in government contracts has declined markedly.

Machinery, building materials and 'others' shrank by 21.3 per cent, 13.9 per cent, and 16.6 per cent respectively.

Consumer demand

But these declines were largely compensated by sharp rises in consumer goods imports.

L/Cs opened for motor vehicles and foodstuffs increased in value by 42.3 percent and 58.2 per cent respectively.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.