Saudi Arabia has revealed its intention to release a new sukuk valued at approximately 35.9B Saudi riyals ($9.57B), following the completion of an early buyback of a portion of the kingdom’s existing debt totalling 35.7B riyals.
The debt instruments set to mature in 2024, 2025, and 2026 have been subject to this move, which is described as the “largest early purchase transaction” organized by the National Debt Management Center, as announced on Sunday. The NDMC has outlined a plan for the new sukuk issuances, divided into four tranches. The first tranche, amounting to approximately 7.5B riyals, is due to mature in 2031.
The second tranche, which has a value of around 14.5 billion, will mature in 2032. They have scheduled the maturity of the third tranche, which totals 10.8 billion riyals, for 2033. Finally, they have set the maturity of the fourth tranche, worth approximately 3.2 billion riyals, for 2038. The initiative is a “continuation of the NDMC’s efforts to strengthen the domestic market and to keep up with market developments which have been reflected positively on the growing trading volume in the secondary market”, it said. The move also enables the NDMC to “exercise its role in managing the government debt obligations and its future maturities”.
“This will also align the NDMC’s efforts with other initiatives to enhance public finance in the medium and long term,” it added.
Saudi Arabia, predominantly reliant on hydrocarbon sales for its revenue, is expanding its funding sources in alignment with its Vision 2030 economic plan and the Fiscal Balance and Financial Sector Development initiatives.
Saudi Arabia’s Growth and Potential
As the biggest economy in the Arab world, Saudi Arabia experienced a 1.1% growth in the second quarter, driven by a notable expansion in its non-oil sector. The nation is actively steering its economy away from reliance on hydrocarbons.
In the timeframe ending June, the non-oil sector surged by 5.5%, compared to the same period in 2022. This estimate comes from the General Authority for Statistics, according to The National News.
Forecasts suggest Saudi Arabia’s economy will achieve a 1.9% growth this year, largely influenced by oil production reductions and lower crude prices, as stated by the International Monetary Fund.
According to the latest World Economic Outlook update from the Washington-based fund, they project that the country’s growth will accelerate to 2.8% in 2024.
On a global scale, S&P Global Ratings anticipates sukuk issuance volumes to range between $160B and $170B in 2023.
“A ramp-up of local currency issuance in Saudi Arabia could change this picture, however, particularly because we expect oil prices to be lower for the remainder of the year,” it said in a report last month.
As stated by the NDMC, they have designated HSBC Saudi Arabia, AlRajhi Capital, SNB Capital, and AlJazira Capital as co-lead managers for the most recent transaction.