Business

Saudi Arabia moves in on first foreign loan in 25 years as oil revenues fall

Aramco oil installation near Al-Khurais, 160 kms east of Riyadh Image copyright Getty Images
Image caption Saudi Arabia's vast oil industry can no longer finance the country's needs

Saudi Arabia is reported to be close to securing a $10bn (£6.9bn) loan deal from international banks as it tries to recover from plunging oil revenues.

Reuters reports the world's largest oil exporter was aiming to raise up to $8bn, but high demand led the Finance Ministry to increase the amount.

It is the first time it has gone to the international markets since the early 1990s when Iraq invaded Kuwait.

The country's oil income, its main source of revenue, fell 23% last year.

The loan, which is expected to be finalised at the end of the month, will help Saudi to reduce its reliance on domestic banks and gauge international demand for its debt.

It could also open the way for Saudi to issue an international bond.

Image copyright Getty Images
Image caption Infrastructure projects such as new metro lines may be affected by record low oil prices

The move comes just days after a meeting of the world's leading oil exporters to discuss capping production ended without agreement.

Saudi Arabia appeared willing to only freeze output if all Opec members agreed, including Iran.

But Iran maintained it would continue the increase in oil production it has followed since economic sanctions were lifted earlier this year.

The oil price has fallen almost two thirds since June 2014, driven by a combination of oversupply and competition from US shale oil producers.

Saudi Arabia's budget deficit soared to $98bn (£65.7bn) last year on the back of falling crude prices.

To help make up for the shortfall, the country has cut public spending and increased tax, fuel and energy prices.

Saudi Arabia is not the only Gulf country to seek help from abroad due to the low oil price.

Earlier this year Qatar secured a $5.5bn loan, while Oman borrowed $1bn from overseas.

The Saudi central bank did not reply to requests for comment.

More on this story