• Government expected to expand domestic bond programme
  • Monthly bond issuance of about 10 billion riyals forecast

Saudi Arabia will probably sell about 120 billion riyals ($32 billion) of debt in 2016 as the country seeks to prop up its finances after oil’s slump, according to Saudi Fransi Capital.

Next year’s expected 10 billion riyals a month of sales will add to an estimated 135 billion riyals of debt issuance this year, analyst Aqib Mehboob wrote in a note to investors on the country’s banking industry.

Saudi Arabia is responding to the decline in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending, delaying projects and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised about 75 billion riyals from debt issuance this year, according to the bank.

Saudi Arabia’s public debt is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2 percent in 2014. “Even with the government running a 20 percent of GDP deficit again, and only funding 25 percent of the deficit through bond issuance, the foreign reserves remain at very comfortable levels,” Mehboob said in the report.

Falling for a seventh month in a row, net foreign assets held by the central bank dropped to $654.5 billion in August, the lowest since February 2013.

Saudi Fransi Capital is the investment-banking arm of Banque Saudi Fransi, a lender that is part-owned by France’s Credit Agricole SA.

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