MENA sovereign borrowing to fall 6% in 2018 to $181 bln: S&P

Sovereign borrowing in the Middle East and North Africa (MENA) region could decrease by 6 percent this year, following a 30 percent decline in 2017, as fiscal consolidation and higher oil prices reduce sovereigns' funding needs, S&P Global Ratings said in a report.

S&P forecast that the 13 MENA sovereigns it rates will borrow about $181 billion this year from domestic and international commercial sources, down $11 billion from 2017.

“We expect MENA sovereigns' absolute commercial debt will increase by $21 billion to about $764 billion at year-end 2018, up 3 percent from 2017,” the rating agency said.

Saudi Arabia, Egypt and Iraq are expected to issue the largest shares of commercial government debt in the region in 2018. The three sovereigns' debt issuance will account for about $113 billion, or 62 percent of the total.

Saudi Arabia’s issuance is expected to account for 17 percent, or $31 billion, of the region's gross commercial long-term borrowing.

Egypt remains the largest borrower with $46.4 billion, or 26 percent of the total.

“We expect that about 40 percent of MENA sovereigns' $181 million of gross borrowing this year will go toward refinancing maturing long-term debt, resulting in an estimated net borrowing requirement of $108 billion,” S&P said.

The agency expects outstanding short-term commercial debt (original tenor of less than one year) to fall to $131 billion by the end of this year.

Meanwhile, the Gulf Cooperation Council (GCC) sovereigns' gross commercial long-term borrowing is expected to total $68 billion in 2018, down from $80 billion in 2017.

A sharp decline oil prices starting mid-2014 had led to a significant widening of GCC fiscal deficits, S&P noted.

In the recent years, however, GCC sovereigns have implemented fiscal consolidation measures to cut government spending and increase non-oil government revenues.

“We expect regional (GCC) fiscal deficits to moderate as a result, while the modest recovery in oil price of late should boost government revenues,” the report said.