The Kingdom of Saudi Arabia plans on issuing debt in the international markets later in 2016 to stem the sharp decline in foreign exchange reserves, following a depressed crude oil market.
A number of banks have been asked to indicate their terms on raising the sovereign debt issuance.
The size and maturity of Saudi Arabia’s first international bond has not been disclosed publicly, but according to credit analysts at two European banks, the kingdom may borrow at rates about 200 basis points above equivalent US Treasury bonds.
Previously, in April 2016, the kingdom raised a $10bn, 5-year loan from banks including JPMorgan, HSBC and Bank of Tokyo-Mitsubishi in a deal that was several times subscribed and allowed the government to increase the sum borrowed.
The loan is seen as a first step towards sovereign bond issuance and Saudi officials have said that the kingdom could increase debt levels from less than 7% of gross domestic product in 2015 to 50% of GDP by 2020.
Saudi Arabia’s debt plans come as falling oil prices encourage other Gulf countries, including Abu Dhabi and Oman, to turn to capital markets for funding.
Separetely, Saudi Arabia’s credit rating has been downgraded by all three big global rating agencies this year.