Saudi Arabia officially became the emerging market world’s biggest-ever debt issuer today, selling $17.5 billion in bonds as part of a global fundraising effort. It needed to raise the money because falling oil prices have torpedoed its economy, and driven its budget deficit to a record high of $98 billion last year, equivalent to 15% of GDP. The country has also been steadily liquidating its vast pool of foreign reserves, to the tune of tens of billions of dollars over the past two years.
Massive debt sales tend to put upward pressure on interest rates, and the Saudi deal is just one of many mega-sales we’ve seen out of the Middle East. The IMF estimates that Gulf countries will run deficits of as much as $765 billion over the next half-decade, deficits that will need to be plugged somehow, including through the sale of boatloads of bonds.
