Complex Made Simple

“Investors gave us a vote of confidence”: Saudi Finance Minister

Saudi will navigate smoothly through 2019 which holds both promise and challenges, with investor confidence in Saudi growing.

Investor confidence was pledged for Saudi at Davos Saudi bond issuances to continue on a monthly basis 300% non-oil growth in past 4 years

Growing tensions in global trade relations, economic challenges, and political headwinds in the Middle East have begun to dominate talks at the World Economic Forum in Davos, Switzerland.

On the sidelines of this annual gathering of the world's top leaders, influencers and analysts, Saudi Arabia's Minister of Finance Mohammed Al-Jadaan shared his views on a number of key issues ranging from China's economic slowdown and the U.S.-China trade dispute to the killing of journalist Jamal Khashoggi.

On the topic of bond issuance:

Saudi Arabia tapped debt markets in January 2019, selling more than $7.5 billion in bonds, drawing in $27 billion in orders – a sign that the country was able to draw support from international investors and keep up the high demand for Saudi debt despite international furor over the killing of the journalist. The country has been selling sovereign debt and seeking new funding through its 'Vision 2030' since oil prices began to take a beating in 2016.

Question: Are you going to be issuing bonds in euro denominations? Give us what the plan is, for bond issuances this year.

Mohammed Al-Jadaan: "The plan is to move with our strategy – we have a debt strategy that spans until 2023. We issued, in January, very successfully. We wanted 7 billion, we had a book of over 27 billion. So, investor confidence is there … and it is actually very widely subscribed, from Asia, to the U.S., to Europe. The plan is to look in to, potentially, another currency, euro is a possibility-,"

Question: Is the yuan a possibility (for bond issuances)?

Mohammed Al-Jadaan: "Later this year … and we are continuing with our local issuances, on a monthly basis."

" … We are thinking about various currencies, but euro is our forecast now, and then we will think about yuan, and others."

On the topic of China's economic slowdown:

China – the world's leading importer of crude announced a 6.6 percent growth in its GDP – numbers that may be impressive anywhere else in the world – but is the country's lowest growth rate in 28 years. These growth figures coupled with weak trade data in December have demonstrated a China economic slowdown and sparked fears of a global recession.

Question: We’ve just had a glimpse of what the China slowdown looks like, what the trade impact is for China, with growth at the lowest level, annually, since 1990. Does that concern you, that China is slowing down, one of the key consumers of your product, oil?

Mohammed Al-Jadaan: "Well, I think there are some slow growth in China. I think we also see that they are consuming more oil in ’18 than ever. So, we believe there will be a demand. We don’t think the possible slowdown in China is going to have a severe impact. We have a strategy on our oil, also, in terms of diversification, in terms of oil to chemicals, and some of my colleagues will be talking about that, in terms of the Aramco strategy on diversifying their demand."

Question: But that doesn’t protect you in 2019, does it?

Mohammed Al-Jadaan: "Well, indeed it does. I think we are very comfortable with our forecasts, in terms of production and price. After all, we are a very important player in the oil market and we believe what we forecasted is likely to happen."

 On the topic of Saudi Arabia's $295 billion budget for 2019:

Despite falling oil prices, Saudi Arabia announced the biggest budget in the country's history with expenditure projected at 1.106 trillion riyals ($295 billion) in an attempt to stimulate growth. With a revenue forecast of 975 billion riyals, the country's deficit is projected to shrink only minimally to 131 billion riyals.

Question: Saudi Arabia just announced the biggest budget in the country’s history, and that does include substantial hand-outs, as well, which is something that you’ve seen growing, from 2018 now to 2019. So many analysts are saying that you need $80 a barrel to break even. Is that right?

Mohammed Al-Jadaan: "Well, as a very important player in the oil market, we don’t speculate on price; we don’t talk about what we expect, and what we budgeted for, but we are very comfortable. We consult our house expert, the Minister of Energy, before we decide on the budget, and we are very comfortable, actually, with our forecasts. That said, we are also diversifying the economy; we are diversifying our income. Our non-oil revenue have grown significantly in the last four years, three times – 300 percent. We intend to continue our fiscal reform, and control our deficit, and, so far, we have been very successful."


On the topic of journalist Jamal Khashoggi's killing and its fallout:

Image: Middle East Monitor/Reuters

Question: The Kingdom went on a fantastic image remake, pitching about technology, and how you were ready for the future, and then the news broke of the killing of journalist Jamal Khashoggi. That seemed to change perceptions that were very welcome to the message from Saudi Arabia. How damaging do you think the affair has been for your country?

Mohammed Al-Jadaan: "It is very unfortunate, really, what happened to Jamal, an innocent human being, that we lost, and the government made it clear that we will bring those who are responsible to justice. Actually, we held the first open court hearing, a couple of weeks back and we’ll leave that to the court, but the government is also determined to make sure that the system-, the fallout in the system is fixed, and there is a lot of work in that direction."

Question: But are you worried that investors don’t believe the line they’re getting from the Saudis – that there’s been separation, and it doesn’t really go all the way back to the Crown Prince? Are you happy that investors are confident that the links are not there?

Mohammed Al-Jadaan: "I believe the investors believe what we said. When we went to the market in January, the investors gave us a vote of confidence, in the economy, but also in our commitment to making sure that the reform continues, at all levels, legal, economic, fiscal, and, obviously, social. We have significant social reform taking place in Saudi Arabia, that is embraced by the people, and we are responding to the people’s needs of Saudi Arabia."

On Saudi Arabia's role in supporting the ailing economy in Lebanon:

Lebanon in a nutshell: The country has for a long time invited its neighbors to jockey for influence and prop up its ailing economy. Qatar, which is weathering a blockade imposed by Saudi Arabia and its allies for allegedly supporting terrorist agendas, recently announced a plan to buy $500 million in sovereign bonds to shore up Beirut's bond market. This was was closely followed by a visit by a Saudi delegation to Lebanon.

Question: You’ve just been in Lebanon, over the last couple of days, and we’ve just seen Qatar deciding to help Lebanon out, to the tune of some 500 million dollar bonds. Is Saudi Arabia prepared to make the same kind of commitment? Because obviously, there are a lot of questions, I know, in the mind of your government, about Qatar and its influence.

Mohammed Al-Jadaan: "I was there, in Lebanon, I headed the Saudi delegation to the summit, I had a very constructive discussion with Saad Hariri, the Prime Minister. We are looking forward to him finalizing the government formation. Saudi have been, and continue to be, a very important catalyst of stability in Lebanon; we are interested to see stability in Lebanon, and we will support Lebanon all the way."

Question: And in terms of that economic diplomacy? At the end of the day, what we all understand, particularly in the region, is that economic diplomacy speaks, nothing is for free, there are strings attached. Does it worry you, that the tensions in the region are going to impact the future of Saudi Arabia?

Mohammed Al-Jadaan: "We embarked on a significant reform, and the reform also deals with challenges, both internally, that we will need to deal with … and correct, along the way, it is not going to be a free ride, but also geo-politically, and we are dealing with that. But we are also determined to making sure we play our role, as a catalyst of stability in the region. We are supporting the region, we are talking to our allies in the region. We are helping countries that need support. We are talking to Pakistan, Jordan, Egypt, Bahrain, Tunis, and other countries in the region, so we wanted to make sure that Saudi provides the stability that the region, and the hope that the region needs."

On the topic of the U.S.-China trade dispute:

In July 2018, U.S. President Donald Trump followed through on his campaign threats by imposing tariffs on $250 billion worth of Chinese products. China responded with tariffs on $110 billion worth of U.S. goods and threatened further qualitative measures on U.S. businesses operating within its borders. This quickly escalated into a trade war that has hit global stock markets, added to China's economic woes, and begun murmurs of a global recession.

Question: One of the biggest concerns in the room is that the U.S. and China may not resolve their dispute. What would you say to both countries?

Mohammed Al-Jadaan: "I am very optimistic that a deal will be made in the next few months, I think it is in the interest of both countries, and the world, to avoid that kind of issue. We are determined to making sure that our country is open, and Saudi Arabia is really open for investment, and we are welcoming international investors all the way. We have just signed a couple of deals with the private sector, two weeks ago, a third one, last week, and three deals, in the next couple of weeks."

The above interview was conducted by CNBC and shared with AMEinfo.