Saudi Arabia has completed the issuance of bonds worth $12 billion, as the kingdom continues to tap international debt markets to raise money amid economic transformation plans.
The total order book for the three-tranche bond – valued at $5 billion, $3 billion and $4 billion – reached $37 billion, with an oversubscription of three times of the total offering, the National Debt Management Centre said in a statement on Tuesday.
“This transaction is part of NDMC’s strategy to diversify the investors’ base and meet the kingdom’s financing needs from international debt capital markets efficiently and effectively,” NDMC said.
“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.”
There is scope for further borrowing, according to Ralf Wiegert, head of Mena Economics at S&P Global Market Intelligence.
The Saudi government “still has room for more borrowing in the next two to three years before more difficult decision have to be taken, such as cutting back spending for one of the mega-projects or for investments in facilities related to the sports events that will take place in Saudi Arabia in the next 10 years”, he told media.
The latest offering comes after Saudi Arabia this week approved the annual borrowing plan for the fiscal year 2025, with funding needs for the year estimated at 139 billion Saudi riyals ($37 billion), including covering the anticipated budget deficit of 101 billion riyals and to repay principal debt amounting to 38 billion riyals.
Last week, the kingdom also announced that it raised $2.5 billion from three foreign banks to finance its budgetary needs.
The Public Investment Fund also plans to raise $7 billion from its first murabaha credit facility to diversify its funding sources to boost investments, it said on Monday. The financing is part of the sovereign wealth fund’s medium-term capital-raising strategy.
“The current issuance was in US dollars, however, we would not be surprised if they looked to diversify their subsequent borrowing in other currencies to diversify their sources of funds. Their strong credit rating and the recent upgrade by Moody’s would help the kingdom raise money at favourable rates,” Chiro Ghosh, vice president of financial institutions at Bahrain-based Sico Bank, told media.
“After the issuance, Saudi Arabia’s public sector debt would still be less than 30 per cent of its gross domestic product, which is a very favourable matrix relative to most of its global peers.”
In November, global credit ratings agency Moody’s Investors Service upgraded Saudi Arabia’s rating to “Aa3″ from “A1”, with a stable outlook as the kingdom continues to focus on diversifying its economy and boost its non-oil sector.
“Over time, these advancements are expected to reduce Saudi Arabia’s exposure to oil market developments and long-term carbon transition on its economy and public finances.” Moody’s said at the time.
The ratings agency expects the non-oil private sector GDP of Saudi Arabia to expand 4 per cent to 5 per cent in the coming years, positioning it among the highest in the GCC region.
Saudi Arabia, the Arab world’s largest economy, is undergoing a massive economic transformation, as part of vision 2030 programme, with new projects in infrastructure, tourism, real estate and other sectors.
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