Saudi Arabia begins sale of 25b riyal domestic debt, first of 2017

Biggest oil exporter is tapping international and domestic markets to finance budget gap

Saudi Arabia, the Arab world’s biggest economy, started the sale of its first riyal-denominated debt in 10 months, according to people with knowledge of the matter.

The kingdom’s three-part Islamic offering consists of bonds priced between 2.9 to 3 per cent for five-year debt, 3.25 to 3.35 per cent for seven-year notes and 3.55 to 3.65 per cent for a 10-year issue, the people said, declining to be identified because the information isn’t public. Investors had until yesterday evening to submit bids, they said, with one person adding that Saudi Arabia plans to raise as much as 25 billion riyals.

The sale comes as lower oil prices and austerity measures weigh on Saudi Arabia’s economy. Gross domestic product contracted in the three months through March for the first time since 2009 — illustrating the scale of the challenge facing the country’s new heir, Crown Prince Mohammad Bin Salman, as he implements his blueprint for a transition away from dependency.

The government, which said on Sunday it started a local sukuk programme of unlimited size, raised $9 billion from its inaugural sale of international Islamic bonds this year.

A spokesman for the finance ministry declined to comment.

The world’s biggest oil exporter is tapping international and domestic markets to help finance a budget deficit that may reach $53 billion this year. Pricing at these levels would be inside the Saudi interest rate curve, which is 3.19 per cent for five years, according to data compiled by Bloomberg.

Earlier this year, Saudi Aramco raised 11.25 billion riyals from its debut Islamic bond in a private placement. oil