Saudi Arabia Starts Year Of Heavy Borrowing

Saudi is gearing up for another year of heavy borrowing on the back of record 2016-17 fundraising (MEES, 29 September 2017) as it seeks to kickstart its economy. It’s starting with refinancing a $10bn international loan raised in 2016. The original loan, for five years, was Saudi Arabia’s first international loan since 1991 (MEES, 29 April 2016). The refinancing will raise the loan to $16bn.

The Ministry of Finance’s Debt Management Office (DMO) on 2 March confirmed that participating banks had agreed to a 30% cut in the cost of the loan, originally priced at around 120 basis points over Libor.

Having tied up the refinancing, Riyadh can now focus on issuing new international bonds. Last year, the ministry used a cocktail of debt instruments totaling SR134bn ($35bn), consisting of $14bn in domestic sukuk, $9bn in international sukuk and $12bn in international bonds. This helped steady Riyadh’s large foreign reserves, which after falling $116bn in 2015, and $80bn in 2016 dropped just $40bn last year and have held steady at around $500bn in recent months.


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