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Tue 9 Jan 2018 01:50 PM

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Saudi Arabia seen leading GCC bond bonanza in 2018

Gulf states set for a debt-raising spree to fund capital projects this year

Saudi Arabia seen leading GCC bond bonanza in 2018

A new report from Bank of America Merrill Lynch advised clients and investors to “expect a busy period of Gulf Co-operation Council issuance” in the year ahead, with Saudi Arabia reportedly set to issue $20 billion of bonds.

This follows on from last year’s three bond issues, the last of which came in late September, that totalled in excess of $31.5 billion – with $21.5 billion from international markets.

The figure sought in 2018 is higher than expectations. According to Arab News, a second US bank that is advising the Saudi government on bond issues, had believed the figure would be between $5 billion and $10 billion.

Saudi Arabia has been struggle to close its budget deficits since the price of oil collapsed in 2014 - for 2018, the shortfall might exceed $87.5 billion. Raising debt via bonds is a key pillar of addressing the issue and it’s believed that 12 percent of the deficit would be plugged by the bond sale.

Saudi is not alone, however. Oman, which also runs a large budget deficit, is expected to raise $8.5 billion this year, Qatar is set to seek $10 billion on international markets and Bahrain will also be active.

Gulf governments and state-owned enterprises have long looked to international debt to finance capital investment projects. In November last year, Abu Dhabi Crude Oil Pipeline, a unit of Abu Dhabi National Oil Co, raised $3 billion – one of the largest non-sovereign bond in the region’s history.

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