Saudi Arabia is seeking a $10 billion loan from international banks, according to Reuters, which represents the country’s first major loan in more than a decade.
The Saudi government is hoping to discuss the matter with several unnamed banks, and while the amount was also not disclosed, a source told Reuters that it could top $10 billion.
To be sure, Saudi Arabia has a massive pile of foreign exchange that will allow it to weather the oil price downturn for years, although few expect oil prices to remain below $40 for that long. Still, the Saudi government surely does not want to burn through all of its cash reserves. In fact, Saudi reserves dropped below $600 billion for the first time in almost four years. The OPEC member burned $14.3 billion in January, the third month in a row that it used more than $10 billion. Is recently as the summer of 2014, Saudi Arabia’s foreign exchange sat well above $700 billion.
With oil prices so low, Saudi Arabia estimated in late 2015 that it ran a budget deficit of $98 billion for the year. The trajectory is unsustainable. S&P downgraded Saudi Arabia’s credit by two notches in February, from A+ to A-.
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