Saudi debt capital market to play large role in financing Vision 2030

Number of riyal-denominated issuances to rise as local market develops, says S&P

Kingdom Centre, Riyadh, Saudi Arabia. Image used for illustrative purpose.

Kingdom Centre, Riyadh, Saudi Arabia. Image used for illustrative purpose.

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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 report published Tuesday.

To finance the plan which aims 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 12 trillion riyals ($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," the report said.

The agency believes 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 U.S. 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 U.S. dollar and the riyal 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," the report added.

(Writing by Brinda Darasha; editing by Daniel Luiz)

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