IT WAS not a hard sell. On August 10th Saudi Arabia issued bonds worth 20 billion riyals ($5.3 billion). Local banks, the only institutions allowed to take part in the sale, have lots of spare cash. The price was appealing, too: the ten-year bonds (there were also five- and seven-year issues) will yield almost half a percentage point more than their American equivalents.
The government did not publicise the sale, but it was hardly a surprise given its deteriorating finances. To maintain spending despite falling oil revenue, it has been cashing in foreign assets at a rapid clip: $60 billion in the first six months of the year. In July Fahd al-Mubarak, the head of the Saudi Arabian Monetary Agency (SAMA), the kingdom’s central bank, announced the government had raised $4 billion selling bonds to state-owned institutions, and talked of more sales to come.
Saudi Arabia does not like borrowing—the last time it issued bonds was in 2007—but the books are not balancing. Oil makes up 90% of government revenues, and its price, roughly $50 a barrel, is less than half what it was in June last year. That is partly Saudi Arabia’s...Continue reading
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