PNN – Bloomberg reported that Saudi Arabia is in the early stages of negotiations to secure at least $8 billion in new loans.
According to the report of Pakistan News Network; the report indicates that this move follows the economic fallout from the war involving Iran and coincides with Riyadh’s efforts to diversify its sources of funding.
People familiar with the matter, who asked not to be named, stated that Saudi Arabia’s National Debt Management Center has begun exploring the possibility of finalizing this deal with banks.
According to some of these sources, the state-owned oil company Aramco has also initiated similar talks with banks. Both deals remain in the early stages and may ultimately not materialize.
Representatives from Saudi Arabia’s National Debt Management Center—an arm of the Ministry of Finance—were unavailable for comment, and Aramco declined to comment on the matter.
Saudi Arabia’s efforts to secure new funding come as the Kingdom and other Gulf States grapple with the economic fallout of the regional conflict. The war continues to disrupt trade through the Strait of Hormuz, drive up import costs, and strain supply chains.
Tehran has targeted Saudi Arabia’s energy infrastructure, and Yemen’s Ansarullah has threatened shipping in the Red Sea—complicating Saudi efforts to bypass the Strait of Hormuz by transporting oil from the country’s western coast.
The Saudi economy also experienced its sharpest contraction since the coronavirus pandemic during the second quarter of the year, with attacks driving a nearly 25% decline in oil sector activity.
However, the war has also driven up oil prices, thereby easing financial pressure on Saudi Arabia. The average price of Brent crude this year has hovered around $87 per barrel, helping to alleviate strain on the country’s finances since the conflict began. Nevertheless, Saudi Arabia recorded a budget deficit of 34.3 billion riyals—equivalent to $9.1 billion—in the second quarter of the year.
This latest move by Saudi Arabia’s National Debt Management Center follows an announcement in May that the agency had completed its annual borrowing plan and secured approximately 90 percent of its financing requirements. The center had previously stated that any additional funding needs would be met primarily through private sources and domestic markets.
Saudi Arabia has emerged as one of the most active borrowers in emerging markets this year, raising approximately $6 billion through the issuance of domestic and international bonds. Aramco also secured an additional $4 billion through similar means. Furthermore, the Kingdom’s sovereign wealth fund raised $7 billion in May—marking one of its first public capital market transactions since the onset of the war against Iran.
Late last year, Saudi Arabia’s National Debt Management Center also secured a seven-year syndicated loan worth $13 billion. This move—rare of its kind—demonstrated the Kingdom’s effort to access capital sources beyond conventional markets to finance the economic diversification program of Crown Prince Mohammed bin Salman.
Saudi Arabia’s shift toward greater reliance on foreign capital is also evident in other sectors of its economy. Bloomberg previously reported that Aramco is pursuing a privatization plan that could ultimately generate up to $35 billion in proceeds. The oil company had earlier announced that it would continue its presence in the debt market and issue new financial instruments to attract diverse groups of investors.