Saudi Arabia is set to sell more international bonds, as it looks to cover a budget deficit caused by lower oil prices and high spending on the government’s economic-diversification drive.
The kingdom is offering dollar Sukuk, or Islamic debt, with maturities of five and 10 years, according to a person familiar with the matter. Initial price talk is around 95 basis points over US Treasuries for the shorter tranche, and 105 basis points for the longer one. The final details, including the size of the bonds and the price, may be decided later on Tuesday.
Investors had placed around $15 billion of orders by midday in London, according to the person.
Saudi Arabia has ramped up borrowing in the past two to three years as the government and sovereign wealth fund spend hundreds of billions of dollars on everything from a new city to electric vehicle factories and tourism resorts. Those are all part of Crown Prince Mohammed bin Salman’s Vision 2030 plan to develop non-oil businesses.
Depressed oil prices, with Brent down 8% this year to around $69 a barrel, have also put pressure on the kingdom’s finances.
Saudi Arabia has already sold around $14.5 billion of sovereign debt in dollars and euros this year, the most among emerging markets after Mexico, according to data compiled by Bloomberg. While the kingdom’s ratio of debt to gross domestic product is low by global standards at under 30%, the International Monetary Fund sees it rising to 41% by 2030.
The IMF forecasts Saudi Arabia’s fiscal deficit increasing to 4% this year, a level the Washington-based lender says is “quite appropriate” given the country’s high foreign reserves. The Saudi government’s own projection is for a shortfall of 2.3%.
There are some early signs the government is reducing spending. In the second quarter, government expenditure was down 9% from the same period in 2024.
Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., and Standard Chartered Plc are the main banks arranging Saudi Arabia’s latest bond deal.
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