Riyadh: The Saudi National Debt Management Center revealed the annual borrowing plan report for 2024, which outlines the Kingdom’s financing strategies in the coming year.
NDMC’s commitment to effective debt management was highlighted through a SAR 36 billion ($9.6 billion) liability management deal. This strategic move extended the “average time to maturity,” reducing the risks associated with future maturities.
Speaking to Arab News, economist Talaat Hafez confirmed that the Kingdom manages public debt “in a very professional manner that balances risks and returns on investments.”
He added: “When the Kingdom settles or repays any debt, it takes into account a number of factors, including the future behavior of interest and exchange rates and the cost savings achievable for early debt retirement.”
The borrowing plan report highlights the achievements of 2023, which provide a solid foundation for the Kingdom as it seeks to maintain financial stability and take advantage of the opportunities available in the coming year.
The Kingdom’s debt portfolio showed resilience amid rising interest rates, as the “financing cost” reached 3.62 percent, and the average maturity time extends to about 9.5 years by the end of 2023.
By balancing debt raising decisions with key risk factors – liquidity, refinancing, interest rates, foreign exchange and credit rating – NDMC ensured a prudent and sustainable debt management strategy.
2023 Overview: The Year of Strategic Borrowing
The Kingdom witnessed remarkable growth in its sovereign debt portfolio in 2023, reaching 1.05 trillion riyals, equivalent to 25.4 percent of the gross domestic product.
Commenting on this, Hafez told Arab News: “The Kingdom is always keen to maintain a conservative debt-to-GDP ratio, to avoid burdening the Kingdom’s financial system with unnecessary borrowing costs, as well as to preserve room and space for future borrowing when needed.” . “
He added that Saudi Arabia has set a debt-to-GDP target of 30 percent, which is “well below global standards of 60 percent.”
The National Debt Management Company demonstrated its prowess in debt management by securing 189 billion Saudi riyals in borrowing activities.
It is worth noting the successful implementation of the deal to manage local sukuk and bonds obligations, strategically redeeming outstanding securities while issuing new securities at the same time.
In terms of sources, domestic financing contributed 47% of the total, demonstrating the Kingdom’s resilience.
The remaining 53% came from international sources, with the oversubscription of international issuances under the global medium-term sukuk and bonds program indicating strong investor confidence.
2024 forecasts and guidelines for increasing debt
Building on the success of the 2023 liability management deal, the Kingdom intends to continue borrowing in 2024, not only to finance the budget deficit but also to refinance debt maturities due in the fiscal year.
The total remaining debt maturities for 2024 amount to 21 billion riyals, while pre-financing activities implemented in 2023 ensured 14 billion riyals of the total financing needs for 2024.
The expected budget deficit for 2024 is 79 billion riyals, leading to total financing needs of about 86 billion riyals.
It is expected that the total debt portfolio will reach 1.11 trillion riyals by the end of 2024.
Hafez pointed out that the annual borrowing plan for 2024 includes prepaying the debt balance amounting to 21 billion riyals from last year’s loans. He also noted that the Kingdom paid 19 billion Saudi riyals in advance in 2023.
Investor relations strategy in 2024
A pivotal aspect of the Kingdom’s 2024 debt management strategy is active engagement with local and international investors.
The center aims to foster strong relationships through a comprehensive outreach program that will extend across key regions, including Asia, Europe and North America.
The center also aims to diversify the investor base. This move is not only a risk mitigation strategy but also a proactive measure to ensure continued access to global debt markets at favorable prices.
NDMC seeks to provide investors with the latest updates on the Saudi economy, discuss environmental, social, governance and sustainability initiatives, and showcase the ambitious transformation agenda of the Kingdom’s Vision 2030.
In addition, it plans to extend invitations to international investors to visit the Kingdom.
This participation will allow investors to interact directly with government leaders and see the progress of mega projects shaping the future of the nation.
Economic flexibility
As the Kingdom continues its journey towards financial stability and economic growth, the proactive measures described in the report enable it to overcome uncertainties in the global financial landscape.
The strategic debt management initiatives, the prudent approach to risk management, and the investor relations strategy confirm the Kingdom’s commitment to maintaining a flexible and sustainable debt profile.
The high credit rating of Saudi Arabia by Fitch, Moody’s, and Standard & Poor’s at “A” with a positive outlook has contributed to supporting the Kingdom’s credit position and enhancing its financial capacity and its strong commitment not to default on loan payments, according to Hafez.
He said: “The Kingdom has proven to the world the strength of its financial share and its ability to meet its financial obligations before they fall due.”
By proactively addressing refinancing risks and diversifying the investor base, NDMC aims to ensure Saudi Arabia’s continued access to global debt markets and favorable financing conditions.