Saudi Arabia’s budget deficit is growing this year as oil prices are down from last year’s levels and well below the $90 per-barrel price the Kingdom is estimated to need to balance its budget.
Brent Crude oil prices have declined by about 8% since the beginning of the year, at around $69 a barrel as of early Tuesday, additionally straining Saudi Arabia’s public finances, which rely the most on oil income to have more money to spend on projects to diversify the economy.
Earlier this year, Saudi Arabia’s revenues from oil exports crashed in April by 21% from a year earlier – to the lowest level in nearly four years – as international oil prices dipped amid concerns about oversupply and potentially weaker global economic growth.
Saudi Arabia, the world’s top crude oil exporter and leader of the OPEC+ group, saw its export revenues from oil at $16.5 billion in April, per data from the Kingdom’s General Authority for Statistics (GASTAT) published at the end of June.
The figure showed a decline of 21.2% year over year, as oil prices crashed by about 15% in April alone amid the U.S. tariff blitz and the OPEC+ decision to hike monthly production this summer by more than previously planned under the agreement to ease the production cuts.
The Kingdom already booked a hefty budget deficit for the first quarter, even before the oil prices plunged in April.
All the deficit in the first quarter was covered by borrowing, suggesting that Saudi Arabia prefers to continue tapping debt markets to using central bank foreign currency reserves.
Now the Kingdom is tapping the debt market again, offering a new issue of Islamic dollar-denominated debt, the so-called Sukuk, with tranches of five- and ten-year maturities, Bloomberg reported on Tuesday, citing a source with knowledge of the plans.
The final details, including the pricing and the size of the bonds, could be announced later on Tuesday. By midday in London, investors had placed $15 billion of orders, according to Bloomberg’s source.
By Charles Kennedy for Oilprice.com
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