Saudi Arabia raises $9 billion in first global Sukuk issue

Analysts believe move could ease pressure on the kingdom's foreign reserves

RIYADH: Saudi Arabia raised $9 billion in its first global Islamic bond issue, the government announced on Thursday, a move analysts say could ease pressure on foreign reserves.

The sale of Islamic bonds, known as Sukuks, comes after the kingdom in October turned to the conventional global debt market for the first time, raising $17.5 billion in a bond issue.

Saudi Arabia has also sold domestic bonds and drawn on its accumulated reserves, all in an effort to reform the economy and address budget deficits caused by a collapse in oil revenues since 2014.



"The ministry of finance received significant interest for the first international issue of the Sukuk programme with an order book from investors in excess of $33 billion," said the official Saudi Press Agency.

There will be two tranches of $4.5 billion, one maturing in 2022 and another in 2027, reflecting "the strong fundamentals of the Saudi economy".

Islamic financial instruments, including Sukuks, are structured to comply with Islamic law, which does not allow the payment of interest.



Riyadh has forecast a budget deficit of $53 billion this year, after an even bigger shortfall last year prompted subsidy cuts and delays in major projects.

In a report this month, Saudi firm Jadwa Investment said the kingdom's foreign reserves, including securities, bank deposits and gold, had fallen to a near six-year low.

Reserves dropped to $514 billion in February, down $10 billion from the previous month and the lowest level since August 2011.

"Any new international sovereign bond, or indeed Sukuk issuance, should alleviate the pressure on foreign exchange reserve withdrawals," said researchers.