Mubasher: The financing needs of GCC region are estimated at nearly $151.3 billion in 2016, said M.R. Raghu, head of research at Markaz, in a recent presentation organised by his company in collaboration with Kuwait Banking Association (KBA).
He added that $78.1 billion of the needs are expected to come from reserves (52%), $57.7 billion from domestic and international bond issuances (38%) and the remaining through loans (10%).
GCC governments are expected to raise between $285-390 billion cumulatively through 2020 through local and international bonds, Raghu said.
He added that low oil prices have altered the fiscal landscape of GCC countries as the prized fiscal surplus registered in erstwhile years has flipped into large scale deficits to the tune of $160 billion in 2015 and 2016, respectively.
“In 2015, the deficit was partly met by domestic bond issuances and the remaining by liquidating reserves held in Sovereign Wealth Funds (SWFs),” Raghu said.
Saudi Arabia for the first time in eight years issued local debt to raise approx. $26 billion from domestic banks and utilised almost $100 billion of its reserves.
While UAE, Kuwait Saudi Arabia and Qatar boast of robust fiscal reserves, Bahrain and Oman have minimal reserves by comparision.
Furthermore, lack of clarity regarding debt management policies of few GCC countries has caused wide spread speculation regarding the way the deficit could be financed. This uncertainty has resulted in fixed income investors demanding wider spreads for outstanding issues in GCC region.
