Saudi Arabia has largely covered its foreign currency financing needs for 2018 by completing an international bond issue worth $ 11 billion, this week.
Riyadh has become one of the largest emerging markets for debt instruments since it began borrowing from abroad in 2016 to finance a state budget deficit caused by falling oil prices.
The Kingdom launched its fourth issue of international bonds this week on three tranches for 7, 12 and 31 years, drawing up huge IPO orders worth around $ 52 billion. This followed a loan refinancing in a $ 16 billion deal last month that raised the original loan by $ 6 billion.
The Saudi Minister of Finance Al-Assaf said that the net deals together amounted to $ 17 billion in the $ 16-18 billion range, “We still have local funding. As you know, we are forced to find the best place to finance our issues, and I think the focus from now on will be on developments in the domestic market.”
“The kingdom has borrowed 18 billion riyals (about $ 4.8 billion) from the local market since the beginning of the year through monthly issues of riyal-denominated instruments and plans to raise about 60-70 billion riyals in 2018, depending on market conditions,” he said.
This month, the Saudi bourse started listing local government bonds in a move that is expected to ease the riyal issue by encouraging a secondary market for trading.
But Al-Assaf said Riyadh would not ignore the international market because it was keen to ensure a stable yield curve. “We are very committed to being a regular and responsible source in the market.”
“We still have local funding. As you know, we are forced to find the best place to finance our issues, and I think the focus from now on will be on developments in the domestic market. ‘
“We focus on liquidity, and when I say liquidity, I mean strongly the balance between supply and demand, and get more diversity in investors,” he said.
“We focus very much on the behaviour of the secondary market, on the behaviour of each point in the curve specifically, and we want our curve to become stable, trustworthy, and become a benchmark for the region.”
The Kingdom does not have an imminent plan to issue international instruments, but it may do so in the second half of 2018 to maintain its standing on the sukuk market and offer debt instruments to Shariah-compliant investors.
Al-Assaf confirmed that the potential sukuk issue would be smaller than the previous $ 9 billion sukuk deal.
Riyadh’s release of the latest international bonds came just days before an international issue Qatar plans to sell its first international bonds since Saudi Arabia and its allies broke diplomatic ties and transports with Doha in June, accusing it of supporting terrorism, which Qatar denies.