Gulf borrowing climbs to new high

Kingdom’s $17.5b bond sees amount raised in loans, bonds eclipse the record $142b set in 2007

Gulf borrowers have raised a record amount in the public debt markets in 2016, and they’re not finished yet.

Saudi Arabia’s $17.5 billion (Dh64.2 billion) international bond sale, the largest ever from an emerging market, boosted the amount raised through loans and bonds in the six-nation Gulf Cooperation Council to $151 billion, according to data compiled by Bloomberg, eclipsing the full-year record of $142 billion set in 2007. That’s before Equate Petrochemical Co’s planned sale of five- and 10-year bonds this week, an offering that may raise as much as $3 billion, according to two people familiar with the deal.

Bridging budget shortfalls

A halving of oil prices since mid-2014 has hurt public finances across a region that produces about a fifth of the world’s oil, pushing Saudi Arabia, Qatar, Abu Dhabi, Oman and Bahrain to sell bonds to bridge budget shortfalls. The surge in new sovereign debt means governments are poised to overtake financial institutions as the region’s biggest borrowers for the first time since 2009.

“As long as the oil price stays at current levels, I expect GCC sovereigns will continue to rely on the capital markets to meet budget deficits,” said Andy Cairns, the global head of debt origination and distribution at National Bank of Abu Dhabi, the UAE’s second-biggest bank by assets. “Next year we’ll see a further increase in GCC bond issuance with growth coming not only from sovereigns but also more supply from regional corporates and financial institutions.”