National Debt Management Center of Saudi Arabia
As the New Year kicked off, the National Debt Management Center (NDMC) closed the January 2021 issuance under the Saudi Arabian Government SR-denominated Sukuk Program.
The issue size was set at SR2.96 billion ($789 million) and the sukuk issuances were divided into two tranches. The first tranche of SR2.08 billion will mature in 2028, while the second tranche of SR880 million is set to mature in 2033.
The NDMC was established in 2015 to secure the Kingdom’s financing needs through the best terms and cost in the short, medium and long terms. Furthermore, terms must be under
an acceptable degree of risk in compliance with the Kingdom’s financial policies and ability to access multiple international financial markets at fair pricing.
Since its inception, the NDMC mandate includes managing government direct and contingent liabilities; developing a strategy for medium-term debt management; arranging, leading and issuing public debt locally and internationally; refinancing, restructuring, and managing the Ministry of Finance’s guarantees to support public financing efficiently; developing legal frameworks, governance and risk management policies related to the public debt management; and developing internal policies and a management structure.
Last year, the NDMC concluded total financing amounting to SR220 billion through diversified funding sources which included domestic and international issuances, as well as new financing channels such as government alternative financing and supply chain financing.
It is worth noting that the government debt-to-GDP ratio in Saudi Arabia is expected to reach 27 percent by the end of 2021, according to Trading Economics.
When compared with other selected G20 economies, this ratio is expected to be 236 percent in Japan, 136 percent in the US, 123 percent in France, 116 percent in the UK and 60 percent in Germany by the end of 2021.
As for pricing, identifying trends in sukuk pricing is difficult, as they depend on many factors including credit rating, investor demand and market liquidity. Rating agencies, such as Standard & Poor, Fitch and Moody’s, periodically update their credit ratings of Saudi Arabia based on different factors including geopolitical risk, oil prices and key fiscal policy developments.
In my opinion, through the Vision 2030 master plan for financial sector development, coupled with the new leadership in the Ministry of Finance, the NDMC is taking a progressive and global marketing direction where leading international financial institutions are taking part in its issuances.
Acknowledging this new trend, we at the annual BMG Summer Retreat, planned for London this summer but subject to the latest UK coronavirus restrictions, believe NDMC will be a key item in the program and its history and achievements to date will be highlighted.
Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.