Saudi Arabia sold $5.5 billion of international bonds on Tuesday to help plug its budget deficit, putting it on course for a record year of issuance as it continues to spend heavily on Crown Prince Mohammed bin Salman’s economic-diversification projects.
The two-part Sukuk, or Islamic debt, sale was made up of a $2.25 billion five-year note and a $3.25 billion 10-year bond. The shorter tranche priced with a spread of 65 basis points over US Treasuries, while the longer one was sold at 75 basis points.
Investors had placed around $17.5 billion of orders, underscoring the strong demand for Saudi debt even as the Gulf nation ramps ups issuance in the face of lower oil prices and high spending that’s squeezing the government’s finances.
Saudi Arabia has now sold almost $20 billion in dollar- and euro-denominated debt this year, according to data compiled by Bloomberg. That cements its status as one of the busiest issuers in emerging markets. It is also well above the 2024 full-year tally and within a whisker of the annual record of $21.5 billion set in 2017.
The latest sale adds to a pick up in syndicated loan activity and a fresh wave of local bank issuance as Saudi companies, the government and sovereign wealth fund come up with extra financing to back the crown prince’s Vision 2030 agenda.
Those financing needs are increasingly pressing, with Brent oil prices down about 8% this year to around $69 a barrel. With prices subdued, the Saudi government projects a fiscal shortfall of about 2.3% of gross domestic product this year. It has widely telegraphed its intention to issue bonds to fill the hole. That’s in addition to measures such as privatizing some assets.
While the kingdom’s ratio of debt to GDP is low by global standards at under 30%, the International Monetary Fund sees it rising to 41% by 2030. The IMF’s own forecast is for the Saudi budget deficit to increase to 4% this year, a level the Washington-based lender says is “quite appropriate” given the country’s high foreign reserves.
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 were the main banks that arranged Saudi Arabia’s latest bond deal.
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