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.


Saudi Arabia, China sign $28 billion worth of economic accords

Updated 22 February 2019
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Saudi Arabia, China sign $28 billion worth of economic accords

  • A total 35 agreements had been signed at a joint investment forum held by Saudi Arabia’s investment agency SAGIA

DUBAI: Saudi Arabia and China signed economic cooperation agreements worth a total of $28 billion at a joint investment forum during a visit by Saudi Crown Prince Mohammed bin Salman to Beijing, Saudi state news agency SPA said on Friday.
It said 35 agreements had been signed at the forum, held by Saudi Arabia’s investment agency SAGIA. It also said four licenses for Chinese companies had been awarded at the forum.

The forum, which coincided with the official visit of Crown Prince Mohammed bin Salman China as part of his Asian tour, aimed at enhancing opportunities for joint cooperation between the two countries in various fields.

Other cooperation agreements signed during the forum included areas of the Kingdom's target sectors such as renewable energy aimed at activating cooperation and consultation frameworks in the field of investment development in wind turbines by manufacturing Electric control devices, wind turbine structures, turbine blades and wind generators with an investment of $ 18 million.

The agreement aims to open up to 800 new job opportunities in one of the most targeted sectors of sustainable development.