Saudi Arabia will take first loan in 15 years

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

Citing three people with knowledge of the matter, Bloomberg said 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 April, said Bloom-berg’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 Riyadh to cut spending and to intensify its efforts to find economic alternatives. Riyadh posted a record budget deficit of $98 billion in 2015 and projects an $87 billion shortfall for 2016.

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.

Meanwhile, President Barack Obama held talks with Saudi Arabia’s King Salman on Wednesday as he began a two-day visit hoping to ease tensions with the historic US ally.

Riyadh and its Sunni Arab Gulf allies have bristled at what they see as Washington’s tilt towards regional rival Iran after Tehran’s landmark nuclear deal with world powers.

Obama, on what is expected to be his last visit to Saudi Arabia as President, is to attend a summit of Gulf leaders on Thursday focused on intensifying the fight against ISIS and resolving the wars in Syria and in Yemen.

“I and the Saudi people are very pleased that you Mr President are visiting us,” King Salman said.

US defence secretary Ash Carter and his Gulf Arab counterparts, meanwhile, met in Riyadh on Wednesday to discuss ways to counter Iranian influence and fight ISIS, hours before Obama arrived in Saudi Arabia. Obama and Carter will seek to reassure the Gulf Cooperation Council that Washington still shares their interests and will continue to ensure their security.