Saudi Crown Prince Mohammed bin Salman (MBS) has plunged the oil kingdom into a swamp of debt and borrowing. MBS is wasting billions of dollars on fake projects amid real Saudi economic challenges and difficulties.
Sources familiar with the matter affirmed that the Saudi Public Investment Fund (PIF), chaired by the Crown Prince, will raise a term loan of up to $5 billion from a syndicate of nine international lenders that will be covered by Korea Trade Insurance Corporation (K-SURE).
The K-SURE financing, which marks PIF’s first covered by an export credit agency, has a 13-year maturity and will initially be for $3 billion, with an option to increase it to $5 billion.
Last week, MBS raised $11 billion from a syndicated loan in an attempt to cover his failed projects including NEOM.
According to the sources, the 10-year loan is offering an interest rate of 100 basis points over the Secured Overnight Financing Rate (SOFR)— the usual reference rate when borrowing in dollars.
The sources further noted that the Industrial & Commercial Bank of China Ltd (ICBC) is the coordinator and bookrunner for the long-term senior unsecured loan.
Saudi Arabia’s government recorded a deficit of SR2.9 billion ($770 million) in the first quarter of the year, sources familiar with the matter revealed.
The budget deficit came as spending shot up by 29% year-on-year, while oil revenues fell back by 3%.
The surge in spending sent the Saudi budget back into the red, the sources added.
Although oil revenues slipped back in the opening months of 2023, overall government revenues rose by a modest 1% in the first quarter, helped by strong receipts from value-added tax (VAT) and other levies. Total non-oil revenues rose 9% compared to the same period in 2022.
The development marks a sharp acceleration from 2022, when spending rose by 12%. Over that year as a whole, the authorities posted a budget surplus of 2.5% of gross domestic product (GDP).
The government had been expected by Moody’s Investors Service and other analysts to maintain a balanced budget in 2023 and 2024. However, the figures for Q1 have prompted one local bank to predict the government will now run a deficit for this year.
As countries and companies rush to get their hands on critical raw materials to bolster supply chains and deal with a rocky energy transition, Saudi Arabia is struggling to secure foreign direct investment.
Experts have warned that the sharp decline in foreign investments is a real disaster that proves that foreign investors do not trust the projects launched by the Saudi crown prince Mohammed bin Salman (MBS) including NEOM and The Line.
