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Abu Dhabi, UAESaturday 23 June 2018

Saudi Arabia raises 3.95bn riyals through sukuk tap 

The government in July last year started selling sukuk under a new programme to diversify its sources of funding 

The Kingdom Tower in Riyadh. Saudi Arabia's Ministry of Finance has secured 3.95bn riyals through a tap of an existing sukuk issue. Waseem Obaidi / Bloomberg
The Kingdom Tower in Riyadh. Saudi Arabia's Ministry of Finance has secured 3.95bn riyals through a tap of an existing sukuk issue. Waseem Obaidi / Bloomberg

Saudi Arabia's ministry of finance has secured 3.95 billion riyals through a tap of an existing sukuk issue, as the kingdom continues to diversify its sources of funding to plug the fiscal shortfall.

The kingdom has tapped its 2018-04 issuance for the first time under the government’s riyal-denominated sukuk programme, the ministry of finance said in a statement on its website on Sunday. The tap brings the total amount of the 2018-04 issuance to 8.95bn riyals, it noted.

The ministry said the latest transaction was divided into three tranches with the largest 3.35bn maturing in 2023. The second tranche of 350 million riyals will be payable in 2025 while the smallest tranche of 250m will mature in 2028.

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Saudi Arabia, the largest Arab economy, began issuing domestic sharia-compliant bonds to bridge a fiscal deficit caused by low oil prices. The government in 2017 July started selling sukuk under a new programme and the latest transaction is the sixth local sukuk deal.

The kingdom, which unveiled last year its biggest budget yet for 2018 to boost growth in the wake of fiscal consolidation and on lower crude output, expects to issue debt, both locally and internationally to finance its shortfall.

In terms of its international issuances, the kingdom has already tapped the market with a $17.5bn sovereign bond in 2016 and a $9bn sukuk deal last year.

Saudi Arabia is forecasting a fiscal deficit of 195bn riyals for 2018 or 7.3 per cent of GDP, compared with a shortfall of 230bn riyals or 8.9 per cent of GDP in 2017.

The government, which issued 134bn riyals in debt in 2017 to finance the budget deficit, is projecting only 117bn riyals in debt issuance for 2018. Debt issuance should not exceed 30 per cent of the country’s GDP.