Saudi Arabia can sell $ 15 billion in bonds, say sources

                

Saudi Arabia is considering the sale of up to $ 15 billion in bonds this year in what would be the first foray into the country in the international capital markets, said people with knowledge of the matter.

Encouraged by record issuance of Qatar, held last week, Saudi Arabia is considering a sale of up to $ 10 billion in securities of five, 10 and 30 years after the end of Ramadan, in July, the people said.

No final decision has been taken and discussions are still in preliminary stages, said the people, who requested anonymity because the talks are private.

The governments of the six countries of the Gulf Cooperation Council, including Saudi Arabia and the United Arab Emirates, the two largest Arab economies, are turning to the public markets after the fall in oil prices has left holes in their budgets.

Last week, Qatar attracted $ 23 billion in orders for its sale of $ 9 billion, the largest ever made in the Middle East. Abu Dhabi raised $ 5 billion from the sale of securities of five and 10 years in April and Dubai is preparing a sale of international bonds this year.

"The government said in raising the ratio of debt to GDP of virtually zero today - should be 5 percent or 6 percent now - to 50 percent in about five years," said Fahd Iqbal, research chief Credit Suisse in the Middle East, in an interview with Bloomberg TV on Wednesday. "So this is really the first step in a larger plan and if they reach the target of 50 percent, which is quite difficult in five years, it would result in something of $ 350 billion."

The Ministry of Finance of Saudi Arabia did not immediately respond to calls seeking comment.

Sales of Middle East bonds and North Africa have risen to a record $ 32 billion this year, according to data compiled by Bloomberg. On Wednesday, Oman also announced bond issuance plans.

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Saudi Arabia is undergoing an economic overhaul, led by Deputy Crown Prince Mohammed bin Salman, to prepare for a post-oil era. One of the biggest challenges the government will deal with the worst economic downturn since the global financial crisis. The authorities are reducing investments to close a budget deficit that reached about 15 percent of gross domestic product in 2015.

The kingdom's credit rating was lowered from Aa3 to A1 last month, the second cut made this year by Moody's Investors Service. The kingdom's rating was also reduced by Fitch Ratings and S & P Global Ratings in early 2016.