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S. Arabia to resume local debt issues


Saudi Arabia is likely to resume domestic government debt issues within a couple of months, Finance Minister Mohammed Al Jadaan said, after it suspended issuance to reduce pressure on the local banking system.

The government halted monthly sales of local-currency conventional bonds in October, partly to curb upward pressure on market interest rates as money-market liquidity tightened. Liquidity has now improved and the three-month interbank rate has come down by nearly 70 basis points.

“We are likely to issue locally, and will most likely issue it in the next month or two. But it will essentially depend on the market and our needs,” Jadaan said on the sidelines of a meeting of Arab finance officials in Morocco. Jadaan did not say whether the new domestic debt issues would be in the form of conventional or Islamic bonds; the government has been preparing to start issuing riyal-denominated Sukuk, bankers say.

Last week, the government raised $9 billion with its first international issue of Sukuk. Officials said last year that they planned to borrow a total $10 billion to $15 billion internationally in 2017, but Jadaan said on Tuesday those figures might be exceeded.

“We have until the end of the year, but it’s not going to necessarily be $15 billion, it could be more. We will tap the international market as long as there is a window and the appetite.

“As you can see, we aimed for $5 billion this time but because demand was so huge, we ended up increasing to $9 billion,” Jadaan said of last week’s sukuk issue. “So we will target $15 billion, but we could go more, or we may go less depending on the market.”

In principle, he said, Riyadh aimed to cover its state budget deficit – officially estimated at 198 billion riyals ($52.8 billion) this year – with bond issues rather than by drawing down its financial reserves.

“We will only tap the reserves if we need to, otherwise we will tap the markets.”

Jadaan said a committee headed by the central bank was looking at how the government could encourage saving in the economy.