(Jan 7): Saudi Arabia, one of the largest bond issuers in emerging markets last year, has started 2025 with a borrowing spree to fund its vast economic-transformation plan.

The kingdom sold US$12 billion (RM54.07 billion) of bonds on Monday (Jan 6), while the sovereign wealth fund announced a US$7 billion Islamic loan signed with 20 banks. Days earlier, the finance minister said it had raised US$2.5 billion from three foreign banks.

Under Crown Prince Mohammed Salman’s Vision 2030 agenda to reshape the world’s biggest crude-oil exporter, the government is spending hundreds of billions of dollars on everything from new cities such as Neom to electric vehicles and semiconductors. It’s also hosting the men’s football World Cup in 2034.

The government’s budget is forecast to remain in deficit for the next few years at least, meaning it has to rely more on borrowing.

Brent crude is trading around US$76 a barrel, below Saudi Arabia’s required level of more than US$90 per barrel to balance its finances in 2025, according to the International Monetary Fund.

Saudi officials have said some of their huge spending plans will be delayed while they focus on priority investments, like preparing to host the Asian Games in 2027 and the World Cup. That’s partly due to funding constraints and to avoid overheating the economy, they have said.

Investor bids for the US$12 billion bond exceeded US$30 billion, according to a person familiar with the matter. The sale included notes with maturities of three, six and 10 years.

Citigroup Inc, Goldman Sachs Group Inc and JPMorgan Chase & Co managed the transaction.

Pricing on the shortest tranche of US$5 billion was tightened by 35 basis points from initial guidance to 85 basis points over US Treasuries, equating to a yield of 5.18%. The US$3 billion six-year notes were sold with a spread of 100 basis points and a yield of 5.44%. The yield on the US$4 billion of 10-year debt was 5.73%.

The kingdom’s funding needs this year are estimated to be 139 billion riyals (RM167.03 billion), the National Debt Management Centre said in a statement late Sunday. Just over 100 billion riyals will cover the budget deficit, while the rest will be used to repay maturing debt, the NDMC said.

As well as bonds, the Saudi government is likely to issue loans. The US$2.5 billion three-year revolving credit facility announced last week was provided by Abu Dhabi Islamic Bank, Credit Agricole SA and Dubai Islamic Bank, according to data compiled by Bloomberg.

The kingdom sold US$17 billion of international bonds in 2024, second only to Romania among emerging markets, according to data compiled by Bloomberg. All those Saudi deals were denominated in dollars. This year, the finance ministry said it may look at other currencies to diversify its funding base.

Saudi Arabia’s overall bond funding last year, including deals done by state-controlled entities such as the sovereign wealth fund, known as the Public Investment Fund, amounted to around US$50 billion.

The government expects to post a fiscal deficit of about 2.8% of gross domestic product this year.

Despite the high spending needs, Saudi Arabia has a strong balance sheet and plenty of room to take on more debt to support its investments, Goldman Sachs has said in recent months. In November, Moody’s Investors Service upgraded the country’s credit rating from A1 to Aa3, on par with France and the UK, citing a positive outlook for the non-oil sector.

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