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Saudi Arabia to take $10 billion loan from foreign bank

Riyadh: Saudi Arabia will take a $10 billion loan from foreign banks to help cover the gap in its state finances occurred due to collapsed oil revenues, Bloomberg News reported on Wednesday.

It would be the first sovereign loan in at least 15 years to the kingdom, the world’s biggest oil exporter. The five-year loan is expected to be signed by the end of this month, said Bloomberg’s sources, who asked not to be identified as the information is private.

They said US, European, Japanese and Chinese banks are lending the funds at about 120 basis points above London’s interbank offered rate.

The global collapse in crude prices over the last two years from more than $100 a barrel in early 2014 to around $40 this month has put pressure on SA to put its efforts to find economic alternatives.

Riyadh posted a record budget deficit of $98 billion in 2015 and projects an $87 billion shortfall for this year.

The shortfall has been covered by the kingdom’s significant fiscal reserves, which dropped to $611.9 billion at the end of 2015 from $732 billion a year before, Saudi Arabia’s Jadwa Investment said in a February report.

The kingdom also issued bonds on the domestic market worth $30 billion.

Apart from it Riyadh took the unprecedented step of raising retail fuel prices by up to 80 percent in December and cutting subsidies for electricity, water and other services. It has also delayed some major projects and encouraged privatisations and the imposition of taxes.