DUBAI (Reuters) - Saudi Arabia is likely to issue euro-denominated bonds this year and some banks have started pitching for the possible debt sale, two sources familiar with the matter said, as the kingdom plans to boost borrowing to offset a sharp drop in oil revenue.
The Saudi issuance is likely to be around June and about the same size as the country’s last euro bond issuance, one of the sources said. The desert kingdom raised 3 billion euros from its debut bonds denominated in euros last July.
A spokesman for the Saudi finance ministry did not immediately respond to a request for comment.
The Saudi government has already raised $12 billion (9.61 billion pounds) in international bonds this year.
Finance Minister Mohammed al-Jadaan said last week total borrowing for the year could go up to around $58 billion as the country - the world’s largest oil exporter - seeks to plug a widening fiscal deficit caused by historically low oil prices and the coronavirus pandemic.
“It’s not that it’s their first time in the euro market, they’ve done one. So there’s this sort of name recognition, credit familiarity with the euro investors for them to go back and do an issuance again,” one of the sources said.
The sources did not name the banks in talks with the Saudis about the potential sale.
Morgan Stanley said in a research note this week that it expects Saudi Arabia to raise another $6 billion from the international debt markets but did not rule out the country raising as much as $10-15 billion.
“We pencil in another $6 billion worth of eurobond issuance and the remainder to be funded via loans. The issuance will likely be in EUR markets as the sovereign has revisited USD markets twice in 2020,” the bank said.
Riyadh last month raised its debt ceiling to 50% of gross domestic product from a previous 30%. Meanwhile, it is also looking to lower spending after having announced a nearly 5% cut in the state’s 2020 budget in March.
Oil production cuts pledged by Saudi Arabia under a recent pact with international producers could wipe tens of billions of dollars from state revenues this year, analysts have said.
According to the International Monetary Fund, oil exporters in the Middle East and North Africa are expected to see a yearly decline in oil export receipts this year of $226 billion.
Additional reporting by Marc Jones; Editing by Emelia Sithole-Matarise