Saudi public debt to represent 21% of GDP by end-2018

Saudi Arabia’s total public debt is projected to stand at SAR 570 billion by the end of this year, representing almost 21 percent of the gross domestic product (GDP), Aljazira Capital said in a report.

This is in line with the government’s plan to limit the debt-to-GDP ratio to a maximum of 30 percent by 2020.

“Although Saudi Arabia has repeatedly resorted to public financing to bridge its state budget deficit, the Kingdom has to restrict itself to a disciplined gross debt level,” the report said.

Total Saudi gross public debt stood at SAR 443.3 billion by the end of 2017, and increased to SAR 483.7 billion during the first three months of 2018.

Aljazira Capital noted that a heavy public sector foreign currency debt burden may affect consolidated expenditure.

Accordingly, authorities plan to change the current debt composition to 65 percent domestic debt and 35 percent international debt financing from 57.35 and 42.65 percent, respectively.

Moreover, the introduction of the trading of government bonds on the Saudi Stock Exchange (Tadawul) will go a long way toward deepening the capital market, the report said.

“In the current scenario, KSA’s debt landscape is enviable. Furthermore, declining fiscal deficit, backed by growth in oil prices,” Aljazira Capital stated, calling on the government and central bank to regularly monitor their funding proceeds, “as this would have a waterfall effect on the entire economy.”