Saudi Arabia Raises $1.9 Billion From Islamic Bond

Updated on
  • Kingdom has tapped domestic debt mkt for 39b riyals this year
  • Borrowing to help bridge budget gap amid lower oil prices

Saudi Arabia raised 7 billion riyals ($1.9 billion) from domestic sukuk sales as the kingdom seeks to bolster its finances amid an economic overhaul and lower oil prices.

The government received more than 24 billion riyals in bids for its third riyal-denominated Islamic bond sale, according to a statement on the Ministry of Finance’s website. It raised 2.4 billion riyals from a five-year tranche priced at 2.75 percent, 3.9 billion riyals from seven-year notes at 3.25 percent and 700 million riyals through a 10-year tranche at 3.45 percent, people familiar with the matter said, asking not to be identified because the information is private.

The kingdom has raised 37 billion riyals in the past three months from domestic debt sales after tapping the international Islamic bond markets for $9 billion. The fund-raising could help the government narrow an expected budget deficit of 198 billion riyals this year, or 7.7 percent of economic output.

Saudi Arabia is implementing a transformation plan aimed at weaning the economy off oil. As part of these efforts, the government plans to create the world’s largest sovereign fund and sell hundreds of state assets, including Saudi Arabian Oil Co. as well as stakes in the stock exchange, football clubs and flour mills. The country is also considering a plan to phase out subsidies for gasoline and jet fuel in November at the latest, a person familiar with the matter said this week.

Read More: Saudis Said to Mull Phasing Out Gasoline Subsidy by End-November

The Public Investment Fund, the kingdom’s wealth fund, will next month host chief executive officers of companies such as BlackRock Inc, HSBC Holdings Plc and SoftBank Group Corp. at an event to showcase its "redefined investment mandate and strategy."

— With assistance by Archana Narayanan

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