DUBAI- Gulf Cooperation Council (GCC) countries will need to raise about $300 billion between 2018 and 2021, with Saudi Arabia having the largest financing requirements, according to rating agency S&P.

Gulf states have increasingly relied on external financing after a slump in oil prices created large budget deficits and prompted the introduction of sweeping economic reforms over the past few years.

Saudi Arabia has become the region’s most prominent issuer of international debt, having borrowed $52 billion through a combination of conventional and Islamic international bonds since its debut in the international markets in late 2016.

On average, S&P expects 70 percent of the $300 billion of combined funding needs to be raised through debt and the remaining 30 percent to be drawn on assets.

Qatar and Bahrain are expected to fill their funding needs almost exclusively through debt while Kuwait and Abu Dhabi will rely more on assets.

Higher oil prices this year and a series of government initiatives aimed at diversifying the region’s economies from oil revenues have improved budget deficits and have slowed the pace at which Gulf sovereigns accumulated debt in 2018.

S&P estimates GCC’s sovereign combined central government deficit to be around $75 billion next year, down from $190 billion in 2016.

“Nevertheless, GCC governments' net debt positions have significantly deteriorated since oil prices fell in 2015 and debt-servicing costs now account for a much larger proportion of fiscal revenue,” the agency said in a research note, adding it does not expect the trend to reverse.

GCC central governments will remain in deficit until 2021, S&P forecasts.

(Reporting by Davide Barbuscia; Editing by Kim Coghill) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))