Saudi Arabia to tap growing debt market to finance spending: S&P

Kingdom is banking on the increasing role of its debt and equities market in financing Vision 2030

Birds eye view of the skyline of Riyadh, Saudi Arabia.

Birds eye view of the skyline of Riyadh, Saudi Arabia.

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Saudi Arabia's debt capital market is set to grow and take on a larger role in financing Vision 2030, S&P Global Ratings said in a new report published.

To finance Vision 2030, Saudi Arabia's plan to transform and diversify its economy and grow the private sector, authorities aim to deepen their debt and equity markets to increase foreign direct investment.

The strategy also entails investments by the government and its related entities as well as the private sector of about SR12 trillion ($3.2 trillion) by 2030.

"We think banks will continue to play an important role in financing Vision 2030, but foresee an increased role for the local capital market," said S&P Global Ratings credit analyst Timucin Engin in the report titled "Vision 2030 Will Push Forward Saudi Arabia's Debt Capital Market."

“What's more, we understand an increased amount of the funding will be pushed off the central government and onto the balance sheets of government-related entities and broader private sector.”

"While the US dollar will continue to be the currency of choice for issuance in Saudi Arabia, we expect to see gradually greater use of Saudi Arabian riyal-denominated issuance as the local market develops," said S&P Global Ratings credit analyst Mohamed Damak.

“The currency peg between the US dollar and the riyal, which we expect will remain, could help attract foreign investors actively hunting for yield in an environment of low interest rates.

“A gradual deepening of the local capital market would likely increase levels of transparency and could reinforce governance practices in Saudi Arabia in coming years. We view development of Saudi debt markets as broadly supportive of the credit profiles of the country's banks and corporates over the long term,” he added. – TradeArabia News Service

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