Saudi Arabia to tap international debt markets

Saudi Arabia is expected to tap the international debt markets to finance a projected budget deficit in 2023-2024, the finance ministry said, against a backdrop of lower oil prices and the country’s extended oil production cuts.

The finance ministry said in a preliminary budget statement on Saturday that it expected a budget deficit of 2 per cent of gross domestic product (GDP) this year rather than an earlier projected surplus, and a deficit of 1.9 per cent of GDP in 2024.

Both deficits are estimated at 161 billion riyals ($43 billion).

Saudi Arabia is working to prepare an annual borrowing plan in accordance with a medium-term debt strategy and “access global debt markets to enhance the kingdom’s position in international markets”, the finance ministry said.

Oil prices, which remain below last year’s average of $100 a barrel, rose above $90 after Riyadh said last month that it was extending a voluntary oil output cut of 1 million barrels per day until the end of 2023.

This has pushed total revenue estimates for 2023 up to 1.180 trillion riyals from an earlier projection of 1.13 trillion riyals, the finance ministry said.

Total revenues are still below the 2022 levels of 1.268 trillion riyals.

Meanwhile, total expenditure is seen rising to 1.262 trillion riyals in 2023, from an earlier estimate of 1.114 trillion riyals, before slowing down marginally to 1.251 trillion riyals in 2024.

Despite strong growth in the non-oil economy, lower oil production and revenue this year impacted the kingdom’s 2023 GDP growth which the ministry revised down to 0.03 per cent compared with a previous forecast of 3.1 per cent. Non-oil GDP is expected to grow 5.9 per cent in 2023.

“The higher spending targets released in the Saudi government budget indicates that domestic growth will remain strong,” said Mazen al-Sudairi, head of research at Al Rajhi Capital. “The increase in spending should support the 4 per cent growth in non-oil GDP next year.”

• Business
• Saudi Arabia