Special to WorldTribune.com
Saudi Arabia has taken out a $10 billion loan from several major banks to plug a growing budget deficit caused by falling crude oil prices.
The five-year loan is Saudi Arabia’s first international debt issuance in 25 years, Financial Times reported on April 20.
Participating lenders include U.S. banks JPMorgan, Goldman Sachs and Morgan Stanley along with Asian lenders Bank of Tokyo-Mitsubishi UFJ, Industrial and Commercial Bank of China and Mizuho Bank.
The price of crude oil plunged by about 70 percent between September 2014 and February 2016 as rising volumes of oil supplies outpaced demand in key markets such as China and Europe. As Saudi oil-export revenues dropped, the kingdom’s budget deficit rose to $98 billion last year.
The Saudi deficit is forecast to grow to 19 percent of gross domestic product in 2016. Saudi officials estimate the national debt will increase by 50 percent over the next five years. In response the kingdom has burned through $150 billion in financial reserves since late 2014, Financial Times noted.
News of the loan came just days after the kingdom blocked a deal among oil producers to freeze production to January levels in an effort to bolster prices. Saudi Arabia, de facto head of the 13-member OPEC cartel, said it would not freeze its output levels unless Iran followed suit, which Iran has refused to do.
The $10 billion loan arrives in Riyadh as other Gulf region governments such as Qatar and Oman are tapping global bond markets to counter the nearly two-year-long slump in oil.