Middle East and Africa sovereign borrowing expected to rise sharply to $23bn in 2008

Despite the increase in borrowing, total new debt accounts for just 1.1% of the combined GDP of the rated sovereigns.

The report, titled "Middle East and Africa Sovereign Issuance Outlook: Net Borrowing To Rise To $23bn in 2008," includes government borrowing data for the 26 Middle Eastern and African (MEA) sovereigns rated at the end of 2007. Standard & Poor's assigned new ratings to 2 sovereigns in the region in 2007- the Emirate of Abu Dhabi and the Gabonese Republic. The report does not include the Emirate of Ras Al Khaimah, which in January 2008 became Standard & Poor's 118th rated sovereign.

Standard & Poor's expects rated MEA sovereigns' commercial medium- and long-term borrowing to be $77.6bn in 2008, up from the $57bn borrowed in 2007. Of this, the vast majority ($54.2bn) is required to refinance existing maturing debt, with the remaining $23.4bn reflecting new debt.
The increase from 2007 reflects both a reduction in the repayment of debt and the rise in MEA sovereigns' borrowing requirements, which are partly due to a reduction in many sovereigns' prospects for privatization receipts. Saudi Arabia, in particular, is expected to slow down its repayments of domestic debt substantially, accounting for almost $20bn of the net increase in borrowing alone.

"The Gulf states of Saudi Arabia, Oman, Kuwait, Qatar, Bahrain, and the Emirate of Abu Dhabi are all expected to record significant fiscal surpluses in 2008," said Standard & Poor's credit analyst Farouk Soussa. "By and large, these countries continue to budget prudently, using oil price assumptions below consensus forecasts, resulting in considerable excess revenues. This has been the case over the past five years and, encouragingly, these unforeseen oil revenues are not being matched by excessive spending, but have been mainly set aside in stabilization funds or Sovereign Wealth Funds. As a result, these countries' borrowing in 2008 is mainly to finance amortizations, provide benchmark issues, and maintain a level of government debt necessary for monetary policy purposes."

For each sovereign, the data covers only debt issued by the central government in its own name (including loans extended by private banks), and excludes issuance by other public bodies and government-guaranteed obligations and borrowing from official lenders such as multilateral lending institutions. The reported figures are Standard & Poor's own estimates, and do not necessarily reflect the issuers' own projections.