Saudi Arabia estimates 2024 financing needs at $23 billion

Saudi Arabia estimates financing needs of about 86 billion riyals ($22.93 billion) in 2024 under a borrowing plan approved by Finance Minister Mohammed Al Jadaan, the National Debt Management centre (NDMC) said.

The kingdom, the world’s top oil exporter, has forecast a budget deficit of 79 billion riyals in 2024, slightly smaller than a deficit of 82 billion riyals projected for last year as lower crude production and global prices reduced revenue.

But the government, tasked with implementing an economic transformation programme known as Vision 2030, will also increase spending over the coming years to drive domestic growth and support non-oil GDP.

The National Debt Management centre said that the borrowing plan is expected to finance the budget deficit and the repayment of upcoming debt maturities, as well as to tap markets opportunistically as part of the country’s liability management strategy.

“Furthermore, it (the borrowing plan) is committed to leveraging market opportunities to execute alternative government financing activities that promote economic growth, such as financing development and infrastructure projects.”

Public debt is expected to reach 1.115 trillion riyals by the end of 2024, which is around 26 per cent of GDP, the government has previously said.

Saudi Arabia has spent heavily on initiatives to diversify its economy from oil and gas, with strong domestic demand fuelling growth and momentum in non-oil activities last year, which outpaced overall growth.

The country remains reliant on hydrocarbon revenue to bolster public finances. Saudi Arabia tapped debt markets for a $10 billion three-part bond in January 2023, followed by a $6 billion Islamic bond in May.

Meanwhile business conditions continued to improve sharply across Saudi Arabia’s non-oil private sector at the end of 2023, according to the latest Riyad Bank Saudi Arabia PMI data.

New order intakes supported a rapid uplift in activity, as companies enjoyed the fastest rate of sales growth since June.

Increased demand momentum gave firms greater confidence on pricing and supported a further marked increase in purchasing activity.

Conversely, employment growth and business activity expectations slipped from November.The headline figure is the seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI).

The PMI is a weighted average of the following five indices: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’ Delivery Times (15 per cent) and Stocks of Purchases (10 per cent).

For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.

The headline PMI registered 57.5 for the second month running in December, indicating a marked improvement in operating conditions across the non-oil economy.

The index has remained above the 50.0 no-change mark for over three years.Saudi Arabian non-oil firms continued to report a substantial uplift in activity levels during December, one that was roughly equal to November’s and common across the monitored sectors.

Businesses mainly associated an expansion in output with higher new business inflows, which increased at the sharpest rate since June.

Moreover, the pace of sales growth was also among the quickest registered in the past nine years, as firms commented on new clients and strengthening demand conditions.

Subsequently, non-oil companies bought more inputs, with the latest data signalling a marked increase in overall purchases. This supported a sharp and faster rise in stock levels than in November.

Businesses also benefitted from a substantial cut in average supplier delivery times, which was one of the sharpest recorded since the survey began 14 years ago.

Naif Al-Ghaith PhD, Chief Economist at Riyad Bank, said: “Saudi Arabia’s non-oil Purchasing Managers’ Index (PMI) for this month reached an impressive 57.5 driven by a faster increase in new orders, particularly within the manufacturing sector. This growth was supported by a sharp rise in business activity and exports, highlighting the resilience and strength of the non-oil economy. Furthermore, the export sector experienced the fastest increase since July, driven by government initiatives and the emergence of new market opportunities.

“Notably, the increased demand and expansion of the non-oil sector have also had a positive impact on employment. With the growing need for skilled workers to meet rising demand, employment has witnessed a noticeable increase.

To attract and retain talent, wages have also seen an upward trend. This positive employment outlook reflects the success of the government’s efforts to create a diverse and robust economy, offering job opportunities and improving the standard of living for its citizens.”