RIYADH: Saudi Arabia has raised $1.87 billion in a new Islamic bond issue as the kingdom bids to finance a budget deficit resulting from low oil prices.

Demand was strong for the third sale of Islamic bonds, known as sukuk, this year with orders exceeding 24bn riyals ($6.4bn), the finance ministry said in a statement cited by the SPA state news agency.

The first two issues were made in April and July and were worth a total of $13.5bn. The kingdom had also issued conventional domestic and global bonds.

The largest Arab economy is suffering from a sharp slide in oil revenues since crude prices plummeted in mid-2014, forcing Riyadh to cut subsidies and delay projects.

The kingdom has forecast a budget deficit of $53bn this fiscal year, down slightly from last year’s shortfall.

Riyadh has also withdrawn more than $230bn from its fiscal reserves since the end of 2014 to finance the budget deficit. Its reserves now stand at just over $490bn.

Economic growth in Saudi Arabia is expected to hit just 0.1 per cent this year, according to the International Monetary Fund.

That would be the country’s worst growth since 2009, when its economy contracted by 2.0pc as oil revenues slumped following the global financial crisis.

Published in Dawn, September 20th, 2017