(Bloomberg) — Saudi Arabia, one of the largest bond issuers in emerging markets last year, has kickstarted 2025 with a borrowing spree as the country looks for new sources of finance to fuel its vast economic transformation plan.
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The kingdom’s sovereign wealth fund closed a $7 billion Islamic loan with a group of 20 international and regional banks, it said in a statement Monday. That announcement came hours after the country’s finance ministry kicked off a bond sale and days after it raised $2.5 billion from three banks.
Under Crown Prince Mohammed bin Salman’s Vision 2030 agenda to transform the world’s biggest crude-oil exporter, the government is spending hundreds of billions of dollars on everything from new cities to sports and technology.
Yet its budget has been in deficit for much of the last decade, and is forecast to remain in the red for the next few years, meaning it is having to rely more on borrowing.
Brent crude is trading around $76 a barrel, below Saudi Arabia’s required level of more than $90 per barrel to balance its budget in 2025, according to the International Monetary Fund. Still, state producer Aramco increased oil prices for buyers in Asia next month in a sign it sees demand in its main market strengthening.
Saudi officials have said that some of their huge spending plans will be delayed while it focuses on priority investments, like preparing to host the Asian Games in 2027 and the 2034 FIFA World Cup. That’s partly due to funding constraints, and also to avoid overheating the economy, they have said.
Dollar Bond
The government started the process of selling its first bond of the year on Monday, saying it plans to issue a three-tranche dollar deal, according to a person familiar with the matter.
The pricing and size of the three-, six- and 10-year notes will probably be finalized later in the day, the person said. Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are main banks managing the transaction.
The kingdom’s funding needs this year are estimated to be 139 billion riyals ($37 billion), the National Debt Management Center said in a statement late Sunday. Just over 100 billion riyals will cover the budget deficit, while the rest will be used to repay maturing debt, the NDMC said.