Kingdom to issue USD sukuk: Saudi Arabia is moving to issue USD-denominated sukuk in two tranches with five-and 10-year maturities, aiming at covering a budget deficit driven by lower oil prices, while also financing diversification efforts, Bloomberg reported, citing a source it said is familiar with the matter.

What we know: The issuance attracted USD 15 bn in orders by midday in London yesterday, the source said, with the initial price set at around 95 bps over US Treasuries for the five-year tranche and 105 bps for the 10-year tranche. The final details of the bonds, including their size and price, could be decided later on Tuesday, with settlement expected on September 9, 2025, according to Bloomberg and Asharq Business.

Banks leading the deal: The issuance is being arranged primarily by Citigroup, HSBC Holdings, JPMorgan Chase, and Standard Chartered, according to Bloomberg’s sources.

The government has been a major player in the sovereign debt market this year, selling around USD 14.5 bn in USD and EUR-denominated sovereign debt, according to Bloomberg. This puts us as the second-largest issuer in emerging markets after Mexico.

Our fiscal deficit is seen reaching 4.3% of GDP this year, before narrowing to 3.4% next year, Riyad Capital noted recently. The IMF also expects the overall fiscal deficit to hit 4.3% of the GDP this year — a figure the Fund considers appropriate to fund Vision 2030 projects.

This reduction in the fiscal deficit will be driven by an anticipated consolidation plan, as Riyad Capital sees officials adopting a policy of fiscal consolidation after a period of rapid fiscal expansion, during which the expenditure rose by a cumulative 32% between 2021 and 2024.

DATA POINT- Budget deficit narrowed to SAR 34.5 bn in 2Q 2025 from SAR 58.7 bn in the previous quarter. Government revenues reached SAR 301.6 bn during the quarter, down 15% y-o-y, while expenditures fell 9% y-o-y to SAR 336.1 bn.

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