The National Debt Management Center (NDMC) in Saudi Arabia has released its Annual Borrowing Plan Report for the year 2024, which outlines the nation’s financial strategies for the forthcoming period.
A key highlight of the NDMC’s strategic financial planning is a SR36 billion ($9.6 billion) liability management transaction, which has helped increase the average time to maturity of debts and in turn, mitigate risks associated with future debt maturities.
An economist speaking to a regional news outlet commended the Kingdom’s adept handling of public debt, balancing the risks and returns on investments, and considering factors like interest and exchange rate forecasts as well as cost savings from early debt settlement.
The report reflects on the strides made in 2023, setting a strong precedent for the Kingdom’s pursuit of sustained fiscal stability and seizing growth opportunities in the year ahead.
Despite rising interest rates, Saudi Arabia’s debt portfolio remained robust, with a funding cost of 3.62 percent and an average maturity period that stood at approximately 9.5 years at 2023’s end.
By carefully weighing key risk factors, such as liquidity, refinancing, interest rates, currency exchange, and credit ratings, the NDMC has cultivated a cautious yet sustainable debt management approach.
Overview of 2023: A year of strategic borrowing
In 2023, the Kingdom saw its sovereign debt portfolio expand to SR1.05 trillion, representing 25.4 percent of the gross domestic product (GDP). The Kingdom’s conservative debt-to-GDP ratio, which is targeted at 30 percent, remains well below the global standard of 60 percent.
The NDMC succeeded in orchestrating SR189 billion in borrowing activities, including a notable domestic sukuk and bond liability management transaction that involved the redemption and issuance of securities.
Domestic funding sources contributed 47 percent to the total, underscoring the nation’s economic resilience, while the remaining 53 percent stemmed from international funding sources, reflecting strong investor confidence as evidenced by oversubscription in international issuances.
2024 outlook and debt raising guidelines
Capitalizing on the previous year’s liability management successes, Saudi Arabia plans to continue its borrowing strategy in 2024. The aim is to finance the budget deficit and refinance debts maturing within the fiscal year. The Kingdom has secured SR14 billion in prefunding activities for 2024’s total financing needs, against the backdrop of a projected budget deficit of SR79 billion and total funding needs of about SR86 billion. By the end of 2024, the total debt portfolio is anticipated to reach SR1.11 trillion.
The economist also mentioned that the 2024 Annual Borrowing Plan includes a prepayment of SR21 billion from the previous year’s borrowings, following a SR19 billion prepayment in 2023.
Investor relations strategy in 2024
An integral part of the Kingdom’s 2024 debt management strategy involves actively engaging with both domestic and international investors. The NDMC plans an extensive outreach program targeting key regions such as Asia, Europe, and North America, aiming to diversify and deepen relationships with investors.
The center is committed to keeping investors informed about the Saudi economy, discussing environmental, social, governance, and sustainability initiatives, as well as promoting the Kingdom’s ambitious Vision 2030 transformation agenda. It also intends to invite international investors to visit the Kingdom to directly engage with government leaders and observe major developmental projects firsthand.
Economic resilience
Saudi Arabia’s approach, as delineated in the report, positions it to navigate global financial uncertainties with proactive fiscal management and economic growth strategies. The Kingdom’s high credit rating, recognized by agencies like Fitch, Moody’s, and S&P as ‘A’ with a positive outlook, strengthens its financial standing and evidences its commitment to meeting financial obligations.
Through its proactive management of refinancing risks and investor base diversification, the NDMC is dedicated to ensuring that Saudi Arabia maintains steady access to international debt markets under favorable terms.