Saudi Arabia raised $11 billion through a syndicated loan, the largest in the world granted to a government this year, in an attempt to finance a budget deficit in a context of weaker oil revenues.
The 10-year loan was financed by at least 15 banks, including Industrial and Commercial Bank of China Ltd., Citigroup Inc., First Abu Dhabi Bank PJSC and HSBC Holdings Plc, according to people familiar with the matter. The loan has a margin of 100 basis points above the Secured Overnight Financing Benchmark Rate (SOFR), the people said.
Saudi Arabia has revised its financial outlook, forecasting deficits from 2023 to at least 2026, according to a medium-term budget projection published in October. The deficit comes amid weaker-than-expected oil prices, lower production from May onwards and increased government spending as the kingdom invests hundreds of billions of dollars in a diversification campaign led by the crown prince and named Vision 2030.
Although part of the Vision 2030 plan is financed by oil revenues, the government also needs to attract foreign investment and borrow. At the end of the third quarter, government debt was 994 billion riyals ($265 billion).
Many analysts consider that Saudi Arabia’s attempt to reduce oil production within OPEC to exert upward pressure on prices is linked to the need to finance the Vision 2030 project. OPEC negotiations are at an impasse due to the refusal of Angola, Nigeria and Congo in reducing their production quotas based on an audit launched by OPEC that they reject.
Read more: ANGOLA, NIGERIA AND CONGO REJECT AUDIT OF THEIR OIL PRODUCTION CAPACITIES, OPENING A CRISIS IN OPEC
“The authorities are seeking to maintain a similar mix of external and internal financing and are also exploring their options in the syndicated loan market for financing specific projects,” economists at Goldman Sachs Group Inc. said.
Many important bodies investing in Vision 2030 projects, including the Public Investment Fund and its subsidiaries developing the new city of Neom, have already borrowed tens of billions of dollars.
Saudi Arabia’s latest financing marked the third year in a row that the kingdom issued the largest syndicated loan to a sovereign nation, according to data compiled by Bloomberg.
By Economic Editor
Angola Portal