• Kingdom seen seeking to raise as much as $5.3 billion
  • World's largest oil exporter looking to fund budget deficit

Saudi Arabia plans to hold a debt auction next week, its first bond sale of the year, as the world’s largest oil exporter seeks to plug a budget deficit, according to two people familiar with the matter.

The auction, to raise as much as 20 billion riyals ($5.3 billion), is the first indication Saudi Arabia will continue tapping the local debt market to fund a budget gap, forecast by the International Monetary Fund to be 14 percent of gross domestic product this year. The Saudi Arabian Monetary Agency plans to price the auction on Jan. 24, with settlement of the sale two days later, the people said, asking not to be identified as the information is private.

Saudi Arabia will probably sell about 120 billion riyals of debt in 2016 to support its finances after oil’s slump, Saudi Fransi Capital said in October. Last year, the government planned to raise 90 billion riyals to 100 billion riyals from monthly debt sales to local institutions, people told Bloomberg in August.

The five-year tranche may be priced from 40 basis points to 45 basis points above similar maturity U.S. Treasuries, the seven-year segment 50 basis points to 55 basis points and the 10-year securities 60 basis points to 65 basis points, the people said.

Spokesmen for SAMA and the Ministry of Finance declined to comment.

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