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Saudi Arabia offers Sukuk worth $788 million in local market

The Saudi Ministry of Finance announced offering Sukuk worth SR2.955 billion ($788 million) in the local market.
Saudi Arabia offers Sukuk worth SR2.955 billion ($788 million) in the local market.

The Saudi Ministry of Finance announced offering Sukuk worth SR2.955 billion ($788 million) in the local market. 

The issue size was set at SR2.96 billion ($790 million), and the Sukuk issuances were divided into two tranches. The first tranche, with a size of SR2.08 billion and a total tranche size of SR2.08 billion, matures in 2028. The second tranche, with a size of SR880 million and a total tranche size of SR880 million, matures in 2033.

Saudi Arabia witnessed a decline in revenues due to oil prices drop due to the Coronavirus outbreak effect on demand.

High public debt

The Saudi public debt increased to SR854 billion ($227.7 billion) by the end of 2020 (34.3% of the GDP). In 2019, the number was SR678 billion ($180.8 billion), 22.8% of the GDP.

The Saudi Cabinet, headed by King Salman, approved the Kingdom of Saudi Arabia’s general budget for 2021, with revenues of SR849 billion and spending of SR990 billion.

The numbers show an expected deficit of SR141 billion, which is 4.9% of the GDP and total public debt of SR937 billion.

Revenues in 2021 are expected to grow compared to 2020, by about 10% to SR849 billion, equivalent to about 30% of the GDP.

King Salman said earlier Coronavirus affected the global economy and this was a challenging year in the world’s history.

According to Bloomberg, the Kingdom was has prepared to return to the global financial markets to sell bonds, to raise $5 billion.

The move aims to meet part of the increased financing needs due to oil prices drop in 2020.

Bloomberg said the Kingdom came close to contracting with banks to manage the current month’s sales process. However, the country didn’t take a final decision on timing. Possibility of postponing sales is still present if market conditions deteriorated.

Oil prices played a significant role by putting pressure on Saudi revenues over the past year. The average price of Brent crude recorded a continuous decline in recent years. The average price for 2020 was at $43 a barrel.

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