Saudi Arabia issues $5bn in dollar-denominated sukuk, says report

Saudi Arabia has reportedly raised $5bn from the sale of dollar-denominated sukuk as the kingdom seeks to plug its budget deficit and increase spending to drive its economic diversification plan under Vision 2030.

The Gulf state sold the Islamic bonds through notes maturing in three, six and 10 years, according to a Bloomberg report. Sources said the deal was priced at yields of 60 basis points (bps) more than comparable US Treasuries for the shortest tranche and at 85 basis points for the longest tranche.

Saudi Arabia is turning to the debt market to find alternative funding sources to cover an anticipated fiscal shortfall of about $21bn this year.

Earlier this year, the largest economy in the Arab world raised $12bn from a sovereign debt sale — its largest deal since 2017, which is more than half the fiscal deficit projected by the government for 2024.

In the first quarter of 2024, Saudi Arabia recorded a budget deficit of $3.30bn (SAR12.4bn), which is significantly narrower than the previous quarter.

The kingdom, which needs to spend hundreds of billions of dollars to fund huge projects aimed at weaning the economy off oil, recently increased its estimate of financing needs for this year to SAR138bn.

Citigroup, Goldman Sachs Group, and BNP Paribas served as bookrunners and global coordinators. Moody’s Ratings has Saudi Arabia at A1, the fifth-highest level of investment grade, with a positive outlook.

Furthermore, there is a robust demand for GCC sovereign bonds, following recent deals in Abu Dhabi and Qatar. Abu Dhabi made its first Eurobond issuance since 2021 in April, raising $5bn in one of the largest deals from emerging markets this year.

Qatar also raised $2.5bn with its first dollar bonds in four years and a debut green deal a week ago.

Read: Saudi Arabia posts budget deficit of SAR12.4bn in Q1 2024