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Saudi Vision 2030 seen backing debt capital market – S&P

Saudi Vision 2030 seen backing debt capital market – S&P
Around 24 of Saudi Arabia’s largest companies plan to invest about SAR 5 trillion

Riyadh – Mubasher: There is a development of Saudi debt markets as broadly supportive of the credit profiles of the Kingdom's banks and corporates over the long term, according to S&P Global Ratings.

Banks will likely continue to play a key role in financing Saudi Vision 2030, with a projection of an increased role for the local capital market.

Saudi authorities tend to deepen their debt and equity markets to raise foreign direct investment to finance Vision 2030. Saudi Arabia’s strategy also entails investments worth SAR 12 trillion ($3.2 trillion) by the government and its related entities, in addition to the private sector, by 2030.

S&P expected a gradual greater use of Saudi Arabian riyal-denominated issuance as the local market develops. In the meantime, the US dollar will continue to be the currency of choice for issuance in Saudi Arabia.

“A gradual deepening of the local capital market would likely increase levels of transparency and could reinforce governance practices in Saudi Arabia in coming years,” according to S&P.

Saudi Arabia’s Capital Markets Authority (CMA) has implemented several measures over the past 10 years to develop its equity and debt capital markets and attract foreign investors.

S&P expected the Saudi government to allocate part of spending to a series of large projects under Vision 2030 and away from the oil sector over the next few years.

The Public Investment Fund (PIF) will likely “play a particular role in supporting and funding a certain level of capital expenditure to create direct and indirect jobs through investments in 13 strategic sectors.”

Around 24 of Saudi Arabia’s largest companies, which are mostly government-related entities, reportedly plan to invest about SAR 5 trillion ($1.3 trillion), while PIF will inject SAR 3 trillion.

“The remaining SAR 4 trillion will be injected under a new national investment strategy programme. This will come on top of the SAR 10 trillion in government spending the authorities have already budgeted,” according to S&P.

A week ago, Crown Prince Mohammed bin Salman said PIF motivates the Saudi economy more than the budget and this will continue in an ascending manner until the state budget’s capital exceeds SAR 300 billion in 2030.