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Abu Dhabi, UAEWednesday 19 December 2018

Saudi may tap domestic Islamic bond market again this month

The kingdom is turning to sukuk market to finance its fiscal deficit

Saudi sukuk issuers have raised less than $2bn so far in 2018. Faisal Al Nasser/Reuters
Saudi sukuk issuers have raised less than $2bn so far in 2018. Faisal Al Nasser/Reuters

Saudi Arabia’s ministry of finance said on Wednesday it may sell a second batch of Sharia-compliant bonds later this month as the Arab world's largest economy seeks to plug a budget shortfall caused by lower revenue from oil.

Last month, the kingdom sold 17 billion Saudi riyals of sukuk under a newly-launched issuance programme.

“The Ministry of Finance, represented by the Debt Management Office announces that, subject to market conditions, it may offer the second issuance under SAR Government Sukuk Program during the week beginning Sunday 20th August, 2017,” the ministry said on its website, without giving the size of the potential sale.

The ministry revealed in July the names of 13 local banks that have been qualified to take part in the sukuk programme.

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Read more:

Saudi Arabia said to kick off first domestic debt sale of 2017

Saudi Islamic banks to reap benefits from sukuk programme

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In April, Saudi Arabia sold US$9bn worth of international sukuk, its first foreign sale of Islamic bonds.

The Saudi government put on hold in October last year the sale of domestic conventional bonds after it sold a $17.5bn international bond, the largest ever by an emerging market nation.

Prior to that sale, the government was selling 20bn riyals of bonds to banks each month since mid-2015 to help finance its budget deficit.

The government is forecasting a budget deficit of 198bn riyals for 2017, compared with an actual deficit of 300bn riyals last year.

Saudi Arabia narrowed its fiscal deficit by a fifth from a year earlier in the second quarter, thanks to an uptick in revenues and a drop in spending.

Revenues rose 6 per cent year-on-year to 163.9bn riyals during the second quarter, with oil revenues surging 28 per cent to 101bn riyals on higher oil prices.

Spending fell 1.3 per cent to 210.4bn riyals in the second quarter, leading to a deficit of 46.5bn riyals, compared to a deficit of 58.4bn riyals in a year earlier period.