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Fri 4 Mar 2016 01:18 AM

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MENA sovereigns forecast to borrow $134bn in 2016

Rating agency S&P says Saudi Arabia to be among biggest issuers this year as it seeks to plus budget deficit

MENA sovereigns forecast to borrow $134bn in 2016

Standard & Poor's Ratings Services projects that the 13 Middle East and Northern African (MENA) sovereigns that it rates will borrow an equivalent of $134 billion from long-term commercial sources in 2016.

This compares with borrowing of $143 billion in 2015, which was more than double the $68 billion that S&P expected would be borrowed in that year.

Following a sharp increase in rated MENA sovereign long-term borrowing from commercial sources in 2015, S&P said it forecast a $9 billion, or 6 percent, decline this year.

It said it expects Egypt, Saudi Arabia and Iraq to be the biggest issuers in 2016, adding that absolute debt levels in MENA are likely to increase by $15 billion by year-end 2016, to reach $667 billion in nominal terms.

S&P said it believes the decrease in long-term commercial debt issuance in 2016 compared with 2015 will largely result from a decline in borrowing by the Egyptian government.

About 40 percent, or $53 billion, of the sovereigns' gross borrowing will be to refinance maturing long-term debt, compared with $61 billion in 2015, resulting in an estimated net borrowing requirement of $81 billion, it added.

Consequently, S&P projects that the commercial debt stock of the MENA sovereigns it rates will reach an equivalent of $667 billion by the end of 2016, up by $85 billion, or 15 percent, from 2015.

"The more than 70 percent decline in oil prices since mid-2014 has weakened GCC countries' public finances, resulting in government deficits for most sovereigns. The financing needs of some GCC governments are apparent, but it remains unclear in some cases exactly how the deficits will be financed, in terms of the mix between asset drawdowns and debt issuance," said S&P.

The ratings agency added that historically, the appetite for GCC sovereigns to increase their debt burdens has been relatively limited.

"We expect Saudi Arabia to account for nearly 70 percent of the GCC countries' total borrowing in 2016 and to become the second-largest issuer of commercial debt in the MENA region," S&P said.

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