UPDATE 1-Saudi Arabia may borrow an extra $26 billion this year -finance minister
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RIYADH/DUBAI, April 22 (Reuters) – Saudi Arabia could borrow around $26 billion more this year and will draw down a maximum of $32 billion from its reserves to finance a government deficit caused by lower oil prices and the coronavirus crisis, the Saudi finance minister said.
The world’s biggest crude exporter has the financial capacity to deal with the current slowdown in economic activity caused by COVID-19 containment measures, Finance Minister Mohammed al-Jadaan said during a press conference on Wednesday.
“The kingdom has the fiscal ability to overcome this crisis … we will get over this in a strong position, the kingdom has gone through and seen other, deeper crises in the past and survived them.”
Saudi Arabia, which has registered 12,772 cases in total as of Wednesday, expects the COVID-19 crisis to last for a few more months but the impact on its first-quarter revenue, which will be announced in the coming days, will be limited, Jadaan said.
Riyadh last month raised its debt ceiling to 50% of GDP from a previous 30% to finance a widening deficit caused by lower oil prices and the economic downturn caused by the pandemic, and this month borrowed $7 billion in international debt markets.
It plans to cover most of its expected deficit through borrowing, which it estimates will reach a total of around $58 billion this year.
Riyadh will also look to lower spending further, after having announced a nearly 5% cut in the state’s 2020 budget in March.
“We are currently studying additional measures to reduce spending. Expenses related to travel, events and other activities as well as projects put on hold will lead to some savings,” Jadaan said.
The minister said last month that the budget deficit could widen to a maximum of 7-9% by the end of the year, from an earlier projection of 6.4%. (Reporting by Marwa Rashad, Davide Barbuscia, Maher Chmaytelli, Alexander Cornwell, editing by Mark Heinrich and Emelia Sithole-Matarise)