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.


Tunisia tourism sector makes flying start to 2019

Updated 12 min 10 sec ago
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Tunisia tourism sector makes flying start to 2019

  • Influx of up to $262.6 million in hard currency revenues — an increase of 35.1 percent on last year

LONDON: Tunisia wooed more tourists in the first quarter of this year, which saw a 17.4 percent increase in arrivals compared to the same period in 2018, according to Tunisian Ministry of Tourism data quoted by Asharq Al-Awsat. 

The tourism sector saw an influx of up to 787.8 million dinars ($262.6 million) of hard currency revenues — an increase of 35.1 percent on last year, the newspaper reported.
Minister of Tourism Rene Trabelsi said that the tourism sector was boosted by arrivals from Europe, which rose around 22.3 percent.
After several years of shunning Tunisia in the wake of a gun attack on a beach in Sousse that killed 39 tourists and one at the Bardo National Museum in Tunis that killed 21, major European tour operators have started to return.
Arrivals from France increased 24.7 percent, while the Dutch market developed around 13.5 percent, it was reported.

 

Trabelsi expects more positive growth in the coming period, based on the bookings of global travel agencies. 
Tunisia seeks to attract 1 million French tourists, 640,000 Russian tourists, and 390,000 German tourists this season. It forecasts that it will host around 9 million tourists overall this year.
In 2018, Tunisia’s tourism revenues jumped to $1.36 billion as the country saw the arrival of a record 8.3 million visitors, according to data from the ministry.
The sector generates about 400,000 jobs and accounts for 8 percent of Tunisia’s gross domestic product (GDP).

FACTOID

9m

Forecast number of tourist arrivals in Tunisia this year, up from 8.3 million last year in Sousse, Tunisia.