Saudi Arabia targets a slowdown in the growth of public debt in the medium term, to complement the government's efforts to enhance spending efficiency and achieve fiscal discipline targets.
The Ministry of Finance expected that the size of the public debt for the 2020 budget will reach about 854 billion riyals, compared to previous estimates of 754 billion riyals, after the Corona crisis that affected the economies of the whole world and pushed the public debt above the target level, especially after the Minister of Finance confirmed that the government will increase Borrowing this year to tackle the pandemic.
The fiscal policy in Saudi Arabia aims to achieve a balance between the objectives of maintaining financial stability, promoting sustainable economic growth, and supporting the stage of economic and social transformation that Saudi Arabia is going through, by the Saudi Vision 2030
Besides, Mohammed Al-Jadaan, Minister of Finance, indicated during the announcement of the 2021 budget that Saudi Arabia was able during the past four years to achieve very large financial control, as Saudi Arabia faced the Corona crisis with high professionalism, with the world's testimony.
Al-Jadaan indicated that more than 350 billion riyals have been saved through raising the efficiency of spending since 2017 and that he was able to preserve the global economy through good management of the energy crisis.
Returning to the public debt, the Ministry of Finance expected the volume of debt issuances in 2020 at 220 billion riyals, with a total of 100 billion riyals in addition to the approved plan issuances.
The data indicate that the growth rate of public debt during 2020 is 26 percent compared to the size of the debt during the year 2019, as the global pandemic affected the state's public revenues and expenditures, especially with the decline in oil prices, while the target for public debt growth was about 11.2 percent before the pandemic.
Gulf debt market developments
The month of January witnessed several international issuances from Gulf and Saudi authorities. The total international issuances coming from emerging markets, including the Gulf region, amounted to $ 23.7 billion, as of January 25, according to data from the credit research firm, CreditSights
As for the most prominent events that have caught the attention of workers in international debt markets about corporate issuances in emerging markets that have taken place so far, the REDD platform, which specializes in in-depth analyzes of fixed income tools in emerging markets, cited unnamed banking sources about some investors exiting Among some transactions "during the order building/opening of purchase order books for bonds", the issuers price the credit margins of their bonds at levels that exceed what investors see as a fair value, is an indication that the issuers do not set a price premium as was previously done, after an improvement market condition.
The "RED" platform added that "as a result, some investors changed their strategy by buying those same issues in the early days of their trading in the gray market, in the hope that they trade below their face value."
Economic Reports Unit