Mena sovereign borrowing set to decline

S&P said in the report that it expects Saudi Arabia, Lebanon and Egypt to issue the majority of commercial government debt in the region this year, accounting for $70 billion, or 52 per cent, of the total.

Middle East and North African governments are likely to issue less commercial debt this year as budget deficits improve after record issuances last year, a report said on Sunday.

The latest research from S&P Global Ratings said sovereign borrowing is set to decline by 20 per cent to US$136 billion following record debt issuances of $170bn last year.

“We project that the 13 Mena sovereigns that we rate will borrow an equivalent of $136bn from long-term commercial sources in 2017,” said Trevor Cullinan, a primary credit analyst based in Dubai for S&P.

“This represents a 20 per cent decline of $34bn in long-term commercial debt issuance.”

S&P said in the report that it expects Saudi Arabia, Lebanon and Egypt to issue the majority of commercial government debt in the region this year, accounting for $70bn, or 52 per cent, of the total.

The decline in borrowing also comes as oil prices rebound following a move by the world’s main oil producers in November to limit supply to the market.

Since November, oil prices have gained about 16 per cent.

As well as getting loans from local and international banks, sovereigns have been tapping bond markets at record pace, selling more than $60bn worth of fixed income last year.

The UAE accounted for $14.4bn of bonds issued in the second quarter last year, Qatar $9bn and Oman $5bn, according to a report in September by the Bank for International Settlements.

In October, Saudi Arabia sold $17.5bn worth of bonds in its first ever international offering.

The Saudi budget deficit widened to 14.8 per cent of GDP in 2015 from 2.3 per cent in 2014 amid the dip in oil prices. That led the world’s biggest oil exporter to tap all forms of debt and raise revenue back at home by reducing subsidies and government pay among other moves to help bring its finances back to order.

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