5 key points from Saudi Arabia’s bond prospectus

Saudi Arabia held its first official meeting with international bond investors on Tuesday, as it looks to issue its debut international sovereign bond to help narrow its ballooning budget deficit.

Here are a few key points from the bond prospectus:

Oil resererves

At the current production levels of 10.2 million barrels per day on average, oil reserves of 266.5 billion barrels are projected to last 70 more years, as new discoveries are currently in the pipeline

Non-oil revenue

The kingdom’s non-oil revenue is expected to rise 6 percent year-on-year (YoY) to SAR 180 billion, accounting for 35 percent of total revenue in the 2016 budget. Total revenue and expenditure are forecast to decline 17 percent and 14 percent YoY to SAR 513.8 billion and SAR 840 billion, respectively.

Government debt

The government’s debt as of August 31, 2016 reached SAR 273.8 billion ($73 billion), SAR 236.3 billion ($63 billion) of which are local debt, while the remaining SAR 37.5 billion ($10 billion) are international.

Public spending cuts

The government plans to cut public admin spending by 54 percent YoY to SAR 101 billion. Allocations for military and security services will be reduced by 34 percent YoY to SAR 213.2 billion, and for infrastructure and transportation by 41 percent YoY to SAR 24 billion.

PIF to reduce lending

The Public Investment Fund (PIF) is set to reduce lending to domestic projects. At the end of 2015, loans granted by the fund to strategic national projects grew to SAR 104 billion ($27.5 billion), compared to SAR 57 billion in 2011. According to the prospectus, PIF “will not act as a source of lending to the same extent that it has historically.”