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MAY 16, 2023

(Bloomberg) -- Saudi Arabia is set to tap the dollar bond market for the second time this year, as weaker oil prices edge the kingdom’s budget into a deficit.

The Middle East’s largest economy plans to sell Islamic securities, known as sukuk, maturing in six and 10 years, according to a person familiar with the matter. The initial yield guidance is 110 basis points over US Treasures for the shorter notes and 135 basis points for the longer ones, the person said.

The International Monetary Fund has said Saudi Arabia, which slipped into a fiscal deficit for the first quarter as the economy slowed and spending increased, may post one for the full year too. The fund’s latest projections put the country’s breakeven oil price at almost $81 a barrel, above Brent’s current price of around $74.

Oil has slipped in the past month, despite supply cuts announced by Saudi Arabia and other members of OPEC+, on traders’ concerns that high interest rates and slowing global growth will weigh on fuel demand.

The IMF’s projection of a deficit of 1.1% of gross domestic product for Saudi Arabia in 2023 is at odds with the government’s expectation for a second straight surplus.

Last year, the government reduced its 2023 financing needs by pre-funding around 48 billion riyals ($12.8 billion) of debt, the National Debt Management Center said.

Saudi Arabia’s dollar bonds trade at an average yield of 4.6%, according to Bloomberg indexes.

The kingdom last sold dollar bonds in January, issuing $10 billion.

Citigroup Inc., JPMorgan Chase & Co., and Standard Chartered Plc are managing the latest sale.


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