Saudi Bonds Provide Much-Needed Breathing Room

Saudi Arabia blazed the global debt capital markets with its first-dollar denominated Islamic bond offering. The $9 billion bond attracted more than three times as many bids as were offered. The money will provide additional breathing room to the government’s finances, just as the $17.5 billion international bond debut last year, which was the largest of its kind in emerging markets. The borrowings, along with rising non-oil revenue, should help arrest the decline in foreign-exchange reserves since 2015.

Understandably, reserves are an essential policy toolkit that all nations covet. They provide insurance against shocks. Unlike many emerging economies, Saudi Arabia saved a lot during the oil boom of the 2000s. Just like a family savings plan, reserves can be used to prevent a balance of payment crisis and provide economic and financial stability.