Gulf Sovereign Wealth Funds Navigate Low Oil Prices


The Kingdom of Saudi Arabia has issued its first sovereign bonds since 2007, facing a significant budget gap that exceeds 145 billion riyals (US$ 38.6 billion) according to Saudi officials. To date, over 244 billion riyals (US$ 65 billion) has been transferred out of foreign reserves in 2015 to cover deficit spending. The reason for these reserve withdrawals is the global price of oil is at low enough levels that budget deficits are blooming under commodity-based Gulf economies. This is being compounded by news of Iran reaching a deal with the United States. If Western sanctions are lifted against Iran, additional crude oil will be hitting global markets. Saudi Arabia is not pulling back on production; the Kingdom told the Organization of the Petroleum Exporting Countries (OPEC) they produced a record high 10.56 million barrels a day.

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