Saudi Arabia Aims to Grow Debt Market to Fund Giga Projects - Bloomberg
Saudi regulators are planning a further expansion of the local debt markets as the kingdom seeks more capital to finance massive construction projects.
There’s been about $228 billion in issuance to date in the history of the Saudi market, representing around 18% of gross domestic product, according to Abdulaziz Abdulmohsen Bin Hassan, a member of the five-person board that governs the Capital Market Authority.
The aim is to boost that to a cumulative 28% by 2030 by encouraging more borrowing, introducing new instruments and increasing foreign participation, he said in an interview this month in London.
“We want to make the Saudi debt market the cornerstone for financing for the giga projects,” Bin Hassan said.
Saudi Arabia has become one of the world’s top construction markets, with projects worth about $1.3 trillion launched since 2016 as part of Crown Prince Mohammed Bin Salman’s Vision 2030 plan to attract investment and diversify the economy away from oil.
The portfolio includes everything from Maldivian-style resorts and housing on the Red Sea to a ski slope in the desert and residential communities in Riyadh.
But as the scale of work has picked up, so too has the need for heavier investment and spending — something that’s become more challenging as the kingdom grapples with oil revenues subdued by lower prices.
That’s made the need for external financing and foreign investment more acute. Regulators are already looking to ease limits on foreign ownership of stocks, in part to pave the way for a fresh injection of money from abroad.
The government also rolled out a new investment law earlier this year aimed to making it easier to do business in the kingdom.
“We want to move away from the traditional method of financing, which is borrowing from banks, to have debt instruments to fill that gap and to fill the financing needs of the kingdom,” Bin Hassan said.
The kingdom’s debt-capital market is still largely made up of sovereign local currency bond issuance.
Regulators introduced over-the-counter settlement in May to bring the market more in line with global standards and has been working to simplify the process of issuing debt in recent years to encourage more companies to tap public markets. It has also said it’s considering easing tax rules.
Saudi Arabia was placed on the watch list for possible inclusion into JPMorgan Chase & Co.’s benchmark emerging-market bond index after what the bank said were “proactive market reforms” in the past two years.
An inclusion of Saudi Arabia may result in a weight of around 2% in the JPMorgan EM Bond Index, translating into a few billion dollars of initial inflows, said Basel Al-Waqayan, a fixed-income strategist at Bloomberg Intelligence.
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