At the end of 2020, the Japanese MUFG Group said that the increasing financial deficit in the Kingdom of Saudi Arabia’s budget may pressure the credit rating of Saudi Arabia and increase the cost of borrowing, while the dollar bonds of the Kingdom today will incur huge losses, affected by warnings of the Finance Minister Mohamed Al-Jadaan at the time regarding the repercussions of the Corona pandemic crisis, and the decline in oil prices.
The group also announced at the time its expectations regarding the Saudi economy, which has reached a very bad level, worst since 1999, noting that its economy is moving towards contraction, not expansion and growth.
It is expected that the value of public debt will continue to rise in 2021 by 3.16% of the value of the gross domestic product, which is the highest rate since 2005.
The decline in foreign reserves is expected by the group in Saudi Arabia to go down to 47 billion dollars. It considered the huge financial reserves of the Kingdom of Saudi Arabia to help it overcome the decline in oil prices in the medium term, but it will face a crisis in the long term, especially if the Corona crisis continues to have its negative impact on the world.
It is worth noting that the Saudi government has raised the debt ceiling to 50% of the gross domestic product instead of 30%, and has also sold international bonds worth $12 billion, subject to increase.
Moody's also revised its outlook for the Kingdom's rating from “stable” to “negative”, but kept its credit rating at “A1”, and indicated that the collapse of oil prices due to the Corona pandemic, increased the financial risks to Saudi Arabia.
Economic news also reported that at the end of last year, dollar bonds (one of the debt instruments) of the Saudi government suffered losses after the investors reached the statements of the Saudi Minister of Finance about strict and painful measures that the Kingdom may take to deal with the economic repercussions that the Kingdom suffers from, and Saudi-term bonds also declined.
The 35-year bonds with a maturity of 2055 increased by 1.4 cents, and were traded at 89.8 cents in the dollar, as well as 40-year bonds with a maturity of 2060 lost about 1.6 cents, to be traded at 98.2 cents in the dollar, thus making the Kingdom the largest loss in its bonds among the Gulf countries, and the reason is due to the fact that the higher the risk to solvency, the lower a percentage of the bond's price will be.
Two years after the Corona pandemic crisis, countries began to arrange their cards, but the reality of the Kingdom is still unclear, which increases the level of pressure on the countries’ budget, and ability to repay, including Saudi Arabia, which depends on oil revenues by more than 90%.
