Saudi Arabia bond issue raises $12.5bn to plug budget shortfall

29 Sep 17

Saudi Arabia has raised $12.5bn from its third international bond sale this year to bridge a budget shortfall and weak oil prices.

The kingdom increased its borrowing to help address the three-year low in oil prices, which put pressure on the country’s public finances. The country is facing a projected budget deficit of about $53bn.

The bond issue on 27 September follows the country’s debut $17.5bn bond last year. Saudi Arabia has raised approximately $31.5bn through bond sales this year.

Although the country’s accounts has improved with the modest recovery in oil prices this year, foreign exchange reserves have fallen to $494bn in July from $744bn in September 2014, according to research firm CreditSights.

Saudi Arabia has also planned broader reforms to boost the private sector and diversify government revenue, while targeting a balanced budget by 2020.

In efforts to cut the budget deficit, Saudi Arabia also plans to introduce 5% VAT ­ – the country’s first­ – along with its neighbours in the Gulf Cooperation Council. 

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