Saudi Arabia’s 15 year Debt Market Hiatus Nearing End?

The Governor of the Saudi Arabian Monetary Agency (SAMA) Fahad Al Mubarak said in a recent interview the authorities in the Kingdom were intensifying their focus on financial inclusion.

The Governor cited recent developments such as the potential opening up of the Saudi capital market to qualified foreign institutional investors, and efforts to facilitate debt issuance to promote corporate bonds and sukuk market as signs of a push by authorities to achieve greater financial inclusion within the Kingdom.

Oil Price

SAMA’s governor remains confident that the Saudi economy will weather the current storm of declining oil prices in the medium term, supported by years of strong economic growth, which averaged 5.5% annually, and a wave of spending on capital projects.

At a recent conference held in Riyadh, delegates focused on the potential to build an international market for Saudi sukuk, as more global groups look for alternative sources of longer term funding.

Mosaed Al-Ohali, chief financial officer of Sabic, said: ‘Large and small companies inside the Kingdom need to have access to long-term funding, which is creating significant appetite for bond issuances. SABIC was a pioneer in the Sukuk market and we believe there is a growing need for the right tools to be in place to ensure correct pricing and ratings.’

Saudi firm Jadwa Research stated earlier this year the Kingdom return to the debt markets this year, ending a 15 year hiatus. The world’s biggest oil exporter will post a deficit of USD 106 billion, compared to a government projection of USD 39 billion, forcing the kingdom into the debt market despite its massive foreign reserves, Jadwa’s report said.