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Debt levels could increase to as much as 50% of GDP in five years

Last week, the Saudi Arabian government was rumored to be creating a division specializing in monitoring government spending. Today, the Financial Times reports that OPEC’s chief producer will invest in international bond markets for the first time in its history. A senior official said the finalization will likely begin in January 2016, and debt levels could increase to as much as 50% of the country’s gross domestic product within five years – a significant jump from its current forecasted levels of 6.7% and 17.3% in 2015 and 2016, respectively.

The Times reports that Saudi’s foreign reserves has declined by $90 billion in the last year, but still sits at about $647 billion overall. The International Monetary Fund (IMF) had previously advised Saudi Arabia to raise debt, saying the country could deplete its spending support within five years if it had continued at the current pace.

Standard & Poor’s believes the Saudi banks have enough assets for up to $100 billion of government securities, according to a Bloomberg article in September. The IMF believes the budget deficit was on track to reach about 20% this year. Previous estimates had Saudi spending at least $12 billion per month as long as prices of Brent crude were below $45/barrel.

ECI Saudi Oil Economics

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