Analysis: State investors help plug #Saudi's yawning deficit | Reuters

Analysis: State investors help plug Saudi's yawning deficit | Reuters

Saudi Arabia is increasingly relying on state-owned investors to finance itself amid the coronavirus pandemic, a strategy that raises questions about how exposed ordinary Saudis could be to a sovereign shock.

The government-backed institutions - namely the pension fund and insurance agency - have seen their domestic debt holdings nearly double in the first six months of this year as Riyadh finances a yawning budget deficit through bond sales.

Their ultimate exposure to Saudi Arabia Inc, however, remains under wraps because the government does not provide comprehensive and up-to-date breakdowns of their investment holdings or their returns.

“In normal times the funding of the government from its own related entities may cause concern over transparency of the ultimate debt figure and over the autonomy of those related entities,” said Hasnain Malik, head of equity strategy at Tellimer.

“However, this concern over the total liabilities of all government entities has existed for some time in other parts of the GCC (Gulf Cooperation Council) and funding very large fiscal deficits probably requires some unorthodox tactics.”