SAUDI NEED MORE MONEY
Saudi Arabia is advancing plans for its first international bond sale as the kingdom seeks to address damage caused to its public finances by lower oil prices.
A number of international banks have been asked to indicate their terms to arrange a sovereign debt issue, according to people familiar with the situation.
Bankers said Saudi Arabia is minded to launch the bond issue later this year.
The kingdom has been planning to raise debt on international markets to slow the sharp decline in foreign exchange reserves, which have been used to sustain domestic spending.
Local banks have also been hit by a rapid decline in domestic liquidity, sparking fears about the government's local bond issuance hampering private sector access to lending.
The size and maturity of Saudi Arabia's first international bond has not been made public, but credit analysts at two European banks suggested that the country might expect to borrow at rates about 200 basis points above equivalent US Treasury bonds.
In April, the kingdom raised $10bn in a five-year loan from global banks including JPMorgan, HSBC and Bank of Tokyo-Mitsubishi in a deal that was several times subscribed and allowed the government to increase the sum borrowed.
The loan is seen as a first step towards sovereign bond issuance and Saudi officials have said that the kingdom could increase debt levels from less than 7 per cent of gross domestic product in 2015 to 50 per cent of GDP by 2020.
Saudi Arabia's debt plans come as falling oil prices encourage other Gulf countries, including Abu Dhabi and Oman, to turn to capital markets for funding, setting a new record for borrowing by Middle Eastern governments so far in 2016. This week, Qatar said it was looking to tap dollar bond markets for the first time in five years.
Between 2014 and early 2016, oil prices fell from more than $100 a barrel to less than $30, leaving some of the world's largest oil exporters in the Middle East facing fiscal and current account deficits for the first time in years.
In May, prices began climbing back towards $50-a-barrel levels for the first time this year following mounting supply disruptions. However, the market remains oversupplied and prices came under pressure on Thursday as investors weighed up the chances of a possible June rate rise following the publication of the Federal Reserve's April policy meeting minutes, resulting in a stronger US dollar.
Saudi Arabia's credit worthiness has been downgraded by all three big global rating agencies this year.
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