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

Saudi Arabia plans to issue SAR118bn ($31.5bn) 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 $150bn in outstanding government debt, 54 per cent of which was in local currency and the rest denominated in US dollars.

The kingdom issued $7.5bn 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 $35bn, which will be funded with an approximate net debt issuance of $31.5bn, 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 $181bn in outstanding debt, corresponding to 21.7 per cent 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 per cent of Saudi debt issues had a fixed rate and 27 per cent had a floating rate. By the end of 2019, the government wants to increase fixed-rate debt to 78 per cent of its portfolio.