Saudi Arabia to take $10 billion foreign loan

FRENCH PRESS AGENCY - AFP
RIYADH
Published 21.04.2016 01:05
Updated 21.04.2016 01:08
The need for a $10 billion loan from foreign banks stemming from collapsed oil revenues will be the first sovereign loan in at least 15 years for Saudi Arabia, the world’s biggest oil exporter.
The need for a $10 billion loan from foreign banks stemming from collapsed oil revenues will be the first sovereign loan in at least 15 years for Saudi Arabia, the world’s biggest oil exporter.

Saudi Arabia will take a $10 billion loan from foreign banks to help close the gap in its state finances from collapsed oil revenues, Bloomberg News reported Wednesday. Citing three people with knowledge of the matter, Bloomberg said it would be the first sovereign loan in at least 15 years for the kingdom, the world's biggest oil exporter.

The five-year loan should be signed by the end of the month, said Bloomberg's sources that asked to remain anonymous, as the information is private. They said U.S., European, Japanese and Chinese banks are lending the funds at about 120 basis points above London's interbank offered rate.

The global collapse in crude prices over the last two years -- from more than $100 a barrel in early 2014 to around $40 this month -- has put pressure on Riyadh to cut spending and to intensify its efforts to find economic alternatives. Riyadh posted a record budget deficit of $98 billion in 2015 and projects an $87 billion shortfall for this year. The shortfall has been covered by the kingdom's significant fiscal reserves, which dropped to $611.9 billion at the end of 2015 from $732 billion a year before, Saudi Arabia's Jadwa Investment said in a February report. The kingdom also issued bonds on the domestic market worth $30 billion.

Riyadh took the unprecedented step of raising retail fuel prices by up to 80 percent in December and cutting subsidies for electricity, water and other services. It also delayed some major projects and mooted privatizations and the imposition of taxes.

On Monday the kingdom is to announce its "vision" for future social and economic development, including a "National Transformation Program" aimed at diversifying the economy away from oil, which still accounts for more than 70 percent of state revenues.

Agencies have lowered Saudi Arabia's long-term credit ratings. Fitch Ratings earlier this month downgraded Riyadh to AA- from AA due to the "major negative implications" of the plunge in oil prices.

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