Saudi Arabia to raise around $31bn in debt this year

State-owned Aramco is expected to issue bonds soon. (AFP/File)
Updated 31 March 2019

Saudi Arabia to raise around $31bn in debt this year

  • Saudi Arabia’s debts have increased recently after drop in oil prices
  • Saudi Aramco is expected to issue its first international market bonds in the coming days

DUBAI: Saudi Arabia plans to issue $31.5 billion in debt this year to help finance the national budget deficit, the country’s Debt Management Office (DMO), part of the ministry of finance, said.
Saudi Arabia has borrowed extensively over the past few years to refill state coffers depleted by a drop in oil prices.
At the end of 2018, it had around $150 billion in outstanding government debt, 54 percent of which was in local currency and the rest denominated in US dollars.
The kingdom issued $7.5 billion in international bonds in January. It said its foreign funding this year “would be positioned in a way in which (Saudi Arabia) could secure most of its funding in the first quarter,” to reduce exposure to market risks and to allow Saudi government-related issuers to tap the debt markets.
The statement comes a few days before Saudi Aramco, the state-owned oil giant, is expected to issue its first bonds in the international markets.
Saudi Arabia’s deficit funding requirements for this year are estimated at $35 billion, which will be funded with an approximate net debt issuance of $31.5 billion, while the rest will come from government deposits at the central bank, the DMO statement said.
By the end of 2019, Saudi Arabia plans to have around $181 billion in outstanding debt, corresponding to 21.7 percent of gross domestic product.
The DMO said this year it would try to “contain” the government’s outstanding debt exposure to interest rate risk by reducing the percentage of floating-rate instruments in its portfolio.
At the end of 2018, 73 percent of Saudi debt issues had a fixed rate and 27 percent had a floating rate. By the end of 2019, the government wants to increase fixed-rate debt to 78 percent of its portfolio.


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.