Saudi Arabia could issue $20bn of bonds in regional debt boom, predicts US bank

Gulf states are expected to embark on a debt-raising spree in 2018, with Saudi Arabia taking the lion’s share of issuance that could top $50 billion. (Saudi Aramco)
Updated 07 January 2018
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Saudi Arabia could issue $20bn of bonds in regional debt boom, predicts US bank

DUBAI: Gulf states are expected to embark on a debt-raising spree in 2018, with Saudi Arabia taking the lion’s share of issuance that could top $50 billion, according to experts in global sovereign credit markets.
Bank of America Merrill Lynch (BoAML), the US investment bank, issued a report advising investors to “expect a busy period of Gulf Co-operation Council issuance,” and that it was expecting “very large issuance” from Saudi Arabia of around $20 billion of bonds.
Although marginally lower than the total raised in 2017, this is higher than many previous estimates of the amount the Kingdom would seek to raise on international markets.
A rival US bank, which did not want to be named because it was advising the Saudi government on bond issues, said that it was expecting between $5 and $10 billion in dollar-denominated debt in the course of 2018.
Raising debt is a key part of the Kingdom’s strategy to finance its budget deficit, forecast to reach SR328 billion ($87.5 billion) in the recent budget for 2018.
Official estimates then were that 12 percent of the deficit would be covered by debt issuance, which includes domestic debt as well as sovereign debt on global capital markets.
BoAML said in its report that spreads on Saudi debt were wide for its rating category, but were justified by the large amount to be issued. A wide spread usually indicates a riskier investment proposition.
Saudi Arabia has been increasingly looking to international capital markets to help balance the books when lower revenues from oil have hiked the deficit. Last year, the Kingdom raised a total of $21 billion on global markets, and a further $10 billion from domestic issues.
Historically low interest rates have also increased investors’ appetite for bigger debt issuance.
Other GCC countries are also expected to take part in the debt bonanza this year. BoAML said that it was expecting Qatar to raise a total of $10 billion on international markets, especially as a $2 billion Eurobond matures this month.
The country has come under pressure as a result of disruption to its financial system from the sanctions imposed on it by Saudi Arabia, Bahrain and Egypt over allegations of terrorism funding, and still needs extra international investment for infrastructure spending ahead of the FIFA World Cup in 2022.
Valuations of Kuwait and Abu Dhabi debt are tight, as they are in Dubai, which needs to increase borrowing to help pay for projects in the Expo 2020 business exhibition.
Oman is expected to raise $8.5 billion this year, with large volumes of debt in external markets to fund its big budget deficit.
Bahrain, also running a large deficit, will be active in international debt markets, BoAML said. “We expect the country to be financially supported by the GCC if it commits to reforms,” the bank added.


Can a hungry Mali turn rice technology into ‘white gold’?

Updated 20 October 2018
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Can a hungry Mali turn rice technology into ‘white gold’?

  • Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change
  • Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983

BAGUINEDA: When rice farmers started producing yields nine times larger than normal in the Malian desert near the famed town of Timbuktu a decade ago, a passerby could have mistaken the crop for another desert mirage.
Rather, it was the result of an engineering feat that has left experts in this impoverished nation in awe — but one that has yet to spread widely through Mali’s farming community.
“We must redouble efforts to get political leaders on board,” said Djiguiba Kouyaté, a coordinator in Mali for German development agency GIZ.
With hunger a constant menace, Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change.

 

Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983. It involves planting fewer seeds of traditional rice varieties and taking care of them following a strict regime.
Seedlings are transplanted at a very young age and spaced widely. Soil is enriched with organic matter, and must be kept moist, though the system uses less water than traditional rice farming.
Up to 20 million farmers now use SRI in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast, said Norman Uphoff, of the SRI International Network and Resources Center at Cornell University in the US.
But, despite its success, the technique has been embraced with varying degrees of enthusiasm. Uphoff said that is because it competes with the improved hybrid and inbred rice varieties that agricultural corporations sell.
For Faliry Boly, who heads a rice-growing association, the prospect of rice becoming a “white gold” for Mali should spur on authorities and farmers to adopt rice intensification.
The method could increase yields while also offering a more environmentally-friendly alternative, including by replacing chemical fertilizers with organic ones, he said.
He also pointed out that rice intensification naturally lends itself to Mali’s largely arid climate.

FACTOID

Up to 20 million farmers now use rice intensification in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast.