Saudi Ara­bia to ac­cel­er­ate bond plan in 1H 2015

The Pak Banker - - COMPANIES/BOSS -

Saudi Ara­bia is set to ac­cel­er­ate its bond is­suance pro­gramme in the sec­ond half of 2015, as the king­dom faces a po­ten­tial $130 bil­lion deficit this year, equiv­a­lent to about 20 per­cent of eco­nomic out­put.

Re­ports quoted sources in the bank­ing com­mu­nity sug­gest­ing that the Saudi gov­ern­ment plans to is­sue be­tween SR90-100 bil­lion ($24-27 bil­lion) in the re­main­ing five months of the year.

The re­ports said that this would equate to be­tween SR15 bil­lion and SR20 bil­lion ($4-5.3 bil­lion) a month, with tenors of five, seven and ten years.

Highly liq­uid Saudi banks are ex­pected to be the main pur­chasers of the bonds, ac­cord­ing to Arab News.

The king­dom's cen­tral bank, the Saudi Ara­bian Mon­e­tary Au­thor­ity (SAMA) has al­ready is­sued $4bn worth of bonds in the first half of this year but the abrupt in­crease in the bond-selling pro­gramme is a ma­jor in­di­ca­tor of the ef­fect the con­tin­u­ing low oil price is hav­ing on the Arab world's largest econ­omy.

The pro­gramme is planned to par­tially off­set Saudi Ara­bia's fast-de­clin­ing for­eign cur­rency re­serves, on which the king­dom is draw­ing to keep public spend­ing at an ap­pro­pri­ate level.

Saudi Ara­bia an­nounced in De­cem­ber that it had in­creased its an­nual bud­get for 2015 to $229 bil­lion, a 0.6 per­cent rise on the pre­vi­ous year. A fall in rev­enues, largely due to the drop in the oil price, means that the gov­ern­ment has pro­jected a $39 bil­lion bud­get deficit for this year.

How­ever, the In­ter­na­tional Mon­e­tary Fund (IMF) thinks that the bud­get deficit could bal­loon to $130 bil­lion in 2015, and has warned that Saudi Ara­bia will need "a size­able fis­cal con­sol­i­da­tion" in the com­ing years. From a high of around $737 bil­lion last year, the Gulf state now has $672 bil­lion held as for­eign ex­change re­serves.

In March and April alone, for­eign re­serves dropped by $31 bil­lion, ac­cord­ing to a re­port from Jadwa Re­search.

Saudi Ara­bia has one of the low­est rates of gov­ern­ment debt for any large econ­omy, at around 1.6 per­cent of GDP as of the end of last year, ac­cord­ing to the IMF.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.