Saudi Arabia to Hit Global Debt Market – Borrowing Could Equal 50% of GDP in 5 Years

by John Galt
November 9, 2015 20:00 ET

Whoops.

The Saudis promised the world that the rapid decline in oil prices would have limited impact on their domestic economy.  Despite the public proclamations and chest thumping to reassure overseas markets and investors, in fact the Saudis have been desperate to raise cash as they have now discovered the economic reality of the difference between liquidity and actually having cash on hand.

This was highlighted in none other than the website Reuters via Arabian Business on October 12th:

Oil-dependent Saudi, Abu Dhabi SWFs selling European shares

(Excerpted)

The three biggest sovereign wealth funds of oil-producing countries have been selling European equity holdings since May, a study showed on Monday, another sign of petrodollars being withdrawn from world markets.

Asian funds have meanwhile continued to add European equities, according to the data from Nasdaq Advisory Services, which provides analysis on shareholder and investor activity.

Since May, the Saudi Arabian Monetary Authority has sold $1.2 billion worth of equities across Nasdaq’s European client base. That accounts for 13 percent of its $9.2 billion holdings in the European companies tracked by Nasdaq.

Think about that.

That is what we publicly know about and not including sales of US holdings via its numerous holding companies, hedge funds, etc. operating with impunity on the American exchanges with little if any actual oversight.

Now comes this story from the Financial Times this evening which drives home the point that the almighty Kingdom of Saudi Arabia may indeed have much larger domestic problems than they are willing to admit to:

Saudi Arabia to tap global bond markets as oil fall hits finances

(Excerpted)

Saudi Arabia has decided to tap international bond markets for the first time, in a sign of the damage lower oil prices are inflicting on its public finances.

Saudi officials say the kingdom could increase debt levels to as much as 50 per cent of gross domestic product within five years, up from a forecasted 6.7 per cent this year and 17.3 per cent in 2016.

Unless the Saudis can encourage a new, larger Middle East conflict, it would appear that their domestic economy will grind to a halt at the same time they are engaged in an expensive conflict in Yemen while allegedly having some wealthy members of their society supporting ISIS to the north. In the end, Saudi Arabia had best pray for higher oil prices or they risk become a fractured version of Mexico in the Middle East.

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