Saudis favour local sales as they plan to deepen debt markets

31/10/2017 06:07 AST

Saudi authorities plan to keep selling local bonds every month as they seek to finance the budget deficit and deepen a nascent debt market, according to the official overseeing the kingdom’s borrowing strategy.

Fahad Al Saif, head of the debt management office at the Ministry of Finance, said local issuance makes up about 65 per cent of the kingdom’s sales and the government wants to maintain this ratio “plus or minus 10 per cent for the foreseeable future.”

The world’s biggest oil exporter turned to the bond market after the slump in crude prices battered its public finances, causing the budget deficit to surge to 15 per cent of economic output. Over the past year, the kingdom has sold $9 billion (Dh33.06 billion) in international Sharia-compliant debt and $30 billion in conventional bonds. It has also raised billions of riyals in local sukuk, something Al Saif said is helping develop a yield curve — a benchmark that could encourage Saudi companies to become regular issuers as well.

The government has sold a total of 38 billion riyals (Dh37.10 billion; $10.1 billion) of local debt over the past four months, he said in an interview in Riyadh. “We want to continue to issue locally every month, again subject to market conditions, investor appetite and also Ministry of Finance requirements.”

The government is also studying when to return to international markets next year, with a sale in the first quarter possible, Al Saif said. Those discussions are still internal and the government is not talking to advisers yet, he said.

Gulfnews