Saudi Arabia Said to Begin Sale of First Local Debt of 2017

(Bloomberg) -- Saudi Arabia, the Arab world’s biggest economy, started the sale of its first riyal-denominated debt in 10 months, according to people with knowledge of the matter.

The kingdom’s three-part Islamic offering consists of bonds priced between 2.9 and 3 percent for five-year debt, 3.25 and 3.35 percent for seven-year notes and 3.55 and 3.65 percent for a 10-year issue, the people said, declining to be identified because the information isn’t public. Investors have until Monday to submit bids, they said, with one person adding that Saudi Arabia plans to raise as much as 25 billion riyals ($6.67 billion).

The sale comes as lower oil prices and austerity measures weigh on Saudi Arabia’s economy. Gross domestic product contracted in the three months through March for the first time since 2009 -- illustrating the scale of the challenge facing the country’s new heir, Crown Prince Mohammed bin Salman, as he implements his blueprint for a transition away from oil dependency.

A spokesman for the finance ministry declined to comment.

The government, which said on Sunday it started a local sukuk program of unlimited size, raised $9 billion from its inaugural sale of international Islamic bonds this year as it seeks to finance its budget deficit. The gap will probably narrow to 9.1 percent of the gross domestic product this year from about 12 percent in 2016, according to data compiled by Bloomberg.

Earlier this year, Saudi Aramco raised 11.25 billion riyals from its debut Islamic bond in a private placement.

To contact the reporters on this story: Archana Narayanan in Dubai at anarayanan16@bloomberg.net, Glen Carey in Riyadh at gcarey8@bloomberg.net, Matthew Martin in Dubai at mmartin128@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Dana El Baltaji, Paul Armstrong