Oil price rise to help MENA debt sales decline this year

Egypt to again be largest regional borrower followed by Iraq and Saudi Arabia

LONDON: Debt sales across the Middle East and North Africa are expected to fall by 6 percent this year following a 30 percent decline in 2017, according to a report from a ratings agency.

Standard & Poor’s (S&P) expects government spending cuts and a firmer oil price to keep a lid on new debt.

The 13 MENA nations — including Saudi Arabia — rated by S&P are forecast to borrow around $181 billion this year, down $11 billion from 2017.

Egypt remains the largest borrower with $46.4 billion or 26 percent of the region’s gross commercial long-term borrowing, followed by Iraq at $35 billion or 19 percent of the total, and Saudi Arabia at $31 billion or 17 percent of total borrowing.

“We expect MENA sovereigns’ absolute commercial debt will increase by $21 billion to about $764 billion at year-end 2018, up 3 percent from 2017,” the ratings agency said in a statement.

S&P also projects that government debt rated in the “AA” category — which includes Abu Dhabi and Kuwait — will account for 19 percent of total debt, up from 16 percent in 2017.

The share of “A” category debt will rise to about 20 percent of total regional debt. S&P noted that no MENA sovereigns are rated “AAA.”

Sharp oil price declines in 2014 and 2015 resulted in a “significant widening of GCC fiscal deficits,” according to S&P.

The S&P Global Ratings report stated that “in recent years, GCC sovereigns have implemented fiscal consolidation measures to cut government spending and increase non-oil government revenues. We expect regional fiscal deficits to moderate as a result, while the modest recovery in oil price of late should boost government revenues.”