Saudi Arabia to tap international debt markets as deficits return By Reuters

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<span>© Reuters. A view shows vehicles driving on a street in Riyadh, Saudi Arabia February 16, 2021. REUTERS/Ahmed Yosri/File Photo</span><br />
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<p>By Aziz El Yaakoubi and Pesha Magid</p>
<p>RIYADH (Reuters) – Saudi Arabia is expected to tap the international debt markets to finance a projected budget deficit in 2023-2024, the finance ministry said, against a backdrop of lower oil prices and the country’s extended oil production cuts. </p>
<p>The finance ministry said in a preliminary budget statement on Saturday that it expected a budget deficit of 2% of gross domestic product (GDP) this year rather than an earlier projected surplus, and a deficit of 1.9% of GDP in 2024. </p>
<p>Both deficits are estimated at 161 billion riyals ($43 billion). </p>
<p>Saudi Arabia is working to prepare an annual borrowing plan in accordance with a medium-term debt strategy and “access global debt markets to enhance the kingdom’s position in international markets”, the finance ministry said. </p>
<p>The country still depends heavily on oil revenues, even though it has spent heavily on initiatives to diversify its economy.</p>
<p>Some analysts have predicted the kingdom’s economy would shrink for the first time since 2020 at the height of the COVID-19 pandemic, although a hefty dividend from state oil producer <span itemscope="" itemtype="http://schema.org/Corporation"><span itemprop="name"> Saudi Aramco </span></span> (TADAWUL:) could offset some of the deficits. </p>
<p>Oil prices, which remain below last year’s average of $100 a barrel, rose above $90 after Riyadh said last month that it was extending a voluntary oil output cut of 1 million barrels per day until the end of 2023.</p>
<p>This has pushed total revenue estimates for 2023 up to 1,180 billion riyals from an earlier projection of 1,130 billion riyals, the finance ministry said. </p>
<p>Total revenues are still below the 2022 levels of 1,268 billion riyals. </p>
<p>Meanwhile, total expenditure is seen rising to 1,262 billion riyals in 2023, from an earlier estimate of 1,114 billion riyals, before slowing down marginally to 1,251 billion riyals in 2024.</p>
<p>Despite strong growth in the non-oil economy, lower oil production and revenue this year impacted the kingdom’s 2023 GDP growth which the ministry revised down to 0.03% compared with a previous forecast of 3.1%. Non-oil GDP is expected to grow 5.9% in 2023. </p>
<p>“The higher spending targets released in the Saudi government budget indicates that domestic growth will remain strong,” said Mazen al-Sudairi, head of research at Al Rajhi Capital. “The increase in spending should support the 4% growth in non-oil GDP next year.” </p>
<p>($1 = 3.7503 riyals) </p>
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