Saud Arabia seeking up to $8bn in foreign loan

Grappling with a huge budget deficit, Saudi Arabia has reportedly asked international banks for a loan of up to USD 8 billion, in what would be the kingdom’s largest foreign borrowing over the past decade.

Riyadh wants foreign banks to submit proposals for the loan that would be between USD 6 billion and USD 8 billion in size, Reuters quoted unnamed sources familiar with the matter as saying on Wednesday.

The Saudis have also asked for an option to increase the amount, the report said.

London-based boutique advisory firm Verus Partners, which is providing advice to Riyadh on the loan, has submitted requests for proposals to a number of banks on behalf of the Saudi Finance Ministry, according to the report.

Neither the Saudi government nor Verus Partners has commented on the report.

The Wall Street Journal also cited bankers, speaking on condition of anonymity, as saying that Riyadh mulls raising billions of additional dollars from an international bond offering after receiving the money.

The report comes as the kingdom is facing a budget deficit of nearly USD 100 billion caused by a sharp slump in oil prices as well as Riyadh’s rising military spending.

Oil sales make up almost 80 percent of the Saudi revenue. The Saudis are selling off foreign assets and issuing domestic bonds in an effort to shrink the deficit and shore up cash reserves, which experts have warned would only last a few more years at their current rate of decline.

Riyadh, the world’s largest oil exporter, has also prepared to sell off parts of oil giant Saudi Aramco.

Last month, the Standard & Poor’s rating agency cut Saudi Arabia’s long-term sovereign credit rating by two notches to A-minus.

The International Monetary Fund (IMF) has also said Saudi Arabia’s fiscal deficit could rise to around $140 billion or 20 percent of gross domestic product, with spending forecast to reach more than $270 billion this year.

The HSBC Holdings plc, Europe’s biggest banking and financial services company, also said in late February that the Persian Gulf Arab states are facing a massive account deficit and a hard time to refinance $94 billion of debt in the next two years.

Last year, Riyadh increased its expenditure by 13 percent to hit 975 billion riyals (USD 260 billion). Saudi Economy Minister Adel Fakeih said about 20 billion riyals (USD 5.3 billion) of that figure was in military, which he attributed to kingdom’s deadly war on Yemen.

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