Saudi Arabia issues $12bn three-tranche international bond

Saudi Arabia’s National Debt Management Centre has completed the issuance of $12 billion worth of international bonds as the kingdom seeks to bridge the budget deficit.

The three-tranche bond offering was oversubscribed 2.5 times as the order book reached $30 billion, NDMC said yesterday.

The transaction is part of the strategy to diversify the investors’ base and meet the kingdom’s financing needs from international debt capital markets efficiently and effectively, it said.

The value of the first tranche was $3.25 billion for a six-year bond maturing in 2030. The second tranche totalled $4 billion for a 10-year bond maturing in 2034 and the third totalled $4.75 billion for a 30year bond maturing in 2054.

The bond issuance is the first this year under the kingdom’s global medium-term note programme.

“The bid-to-cover ratio reflects the strong demand of the kingdom’s issuances, confirming the investors’ confidence in the strength of the kingdom’s economy and its investment opportunities future,” the NDMC said.

Last month, Saudi Arabia approved its general budget for the 2024 fiscal year, which forecast a deficit of 79 billion Saudi riyals ($21.1 billion), accounting for about 1.9 per cent of the country’s gross domestic product.

The largest Arab economy estimated revenue at 1.17 trillion riyals next year, while expenditure is projected at 1.25 trillion riyals, the kingdom’s Ministry of Finance said at the time.

The kingdom reported a budget deficit of 2.91 billion riyals for the first quarter of last year.

In October, Saudi Arabia

revised its growth forecast for 2023 and expects a budget deficit this year as it boosts spending.

The kingdom’s budget deficit widened in the third quarter by about seven times on a quarterly basis as oil revenue fell amid production cuts.

The total budget deficit in three months to the end of September reached 35.8 billion riyals, compared with 5.2 billion riyals in the second quarter, the Ministry of Finance said in a budget update last month.

Saudi Arabia’s economy was set to expand by 0.8 per cent in 2023, according to the International Monetary Fund.