Saudi Arabia Raises $11 Billion Through Syndicated Loan to Fund Budget Deficit

Saudi Arabia Raises $11 Billion Through Syndicated Loan to Fund Budget Deficit

Saudi Arabia has secured a syndicated loan of $11 billion, making it the largest loan obtained by a government globally this year. The funding will be used to address the country’s budget deficit amidst weaker oil revenues. The loan has a margin of 100 basis points above the secured overnight financing rate (SOFR) benchmark and was provided by 15 banks including Industrial and Commercial Bank of China, Citigroup, First Abu Dhabi Bank, and HSBC Holdings.

The Saudi Ministry of Finance has not yet commented on the loan. However, the country’s financial outlook has been revised, with deficits projected from 2023 until at least 2026. This is due to lower-than-expected oil prices, decreased production since May, and increased government spending as part of the Vision 2030 diversification initiative led by Crown Prince Mohammed bin Salman.

While oil revenue will contribute to financing, the government also aims to attract foreign investment and borrow. As of the end of the third quarter, government debt stood at 994 billion riyals ($265 billion). Goldman Sachs economists suggest that Saudi Arabia will continue seeking a mix of external and domestic financing, including exploring options in the syndicated loan market for specific projects.

Key entities involved in Vision 2030 projects, such as the Public Investment Fund and its subsidiaries developing the new city of Neom, have already borrowed significant amounts. Saudi Arabia’s latest syndicated loan issuance marks the third consecutive year that the kingdom has obtained the largest syndicated loan among sovereign nations.