Saudi Arabia returning to global capital market; Aims to raise $5bn

By Rahul Vaimal, Associate Editor
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Saudi Arabia
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Saudi Arabia is planning to get back into the global capital markets with a bond sale which targets to raise about $5 billion to cover the increasing financing needs due to last year’s dip in oil prices.

According to people familiar with the matter, the Kingdom is working on the hiring procedure of the banks for the bond sale which is assigned to be conducted as early as this month.

However, no final decision regarding the timing of the sale has been made yet and if the market conditions get worsen then the Kingdom may even consider delaying the procedures. The Finance Ministry didn’t immediately respond to requests for comment.

Even though the price of oil, which is the key source of income for Saudi Arabia, recovered about 45 percent to reach over $55 a barrel since the end of October, it remains lower than the $80 level which the country needs to balance its budget at a time when the pandemic has disrupted the global economy.

Saudi Arabia still expects to narrow its fiscal deficit this year after spending cuts reduced its funding needs. The country surprised its investors by staying away from foreign capital markets in the second half of last year and choosing to cover almost all of its budget deficit through domestic borrowing. The kingdom’s total outstanding debt stands at almost $228 billion.

Emerging-market bond sales have got off to a brisk start this year as borrowing costs collapsed due to the unprecedented stimulus by central banks to support the economies during the pandemic.

As per the global investment firm, Franklin Templeton’s report, governments and companies in the Gulf region will issue about $120 billion of dollar and Islamic securities in 2021, which compares with a record $126 billion last year.