For the first time ever, Saudi Arabia sells its domestic debt

Saudi Arabia, the Arab world’s biggest economy, started the sale of its first riyal-denominated debt in 10 months. The sale comes as lower oil prices and austerity measures weigh on Saudi Arabia’s economy. Gross domestic product contracted in the three months through March for the first time since 2009 illustrates the scale of the challenge facing the country’s new heir, Crown Prince Mohammed bin Salman, as he implements his blueprint for a transition away from oil dependency.

The kingdom’s three-part Islamic offering consists of bonds priced between 2.9 and 3% for five-year debt, 3.25 and 3.35% for seven-year notes and 3.55 and 3.65% for a 10-year issue, the people said, declining to be identified because the information isn’t public. Investors have until Monday to submit bids, they said, with one person adding that Saudi Arabia plans to raise as much as 25 billion riyals ($6.67 billion) from this sale.

The government, which said on Sunday it started a local sukuk program of unlimited size, raised $9 billion from its inaugural sale of international Islamic bonds this year as it seeks to finance its budget deficit. The gap will probably narrow to 9.1% of the gross domestic product this year from about 12 in 2016, according to data compiled by Bloomberg.

Source Credit: Bloomberg
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